Thirteen years ago, USV invested in the Kik, the company behind the popular messaging app of the same name, and I joined the Board. That set me off on a journey that went from mobile messaging (Kik), to crypto (Kin), to payments (Code).

One of the things about me, and my partners at USV, is we tend to stick with companies and their founders for the long haul. One can argue the merits of that approach, but it is what we do, and this particular journey is an excellent example.

When the Kik messenger app lost out in the race to become the dominant mobile messenger, the team, led by Kik's founder Ted Livingston, pivoted to building a native cryptocurrency, Kin, that would work inside the Kin messenger. That was a novel idea at the time and we are only now starting to see how powerful messaging and money are together in a single app.

That led to the idea of building a developer ecosystem around Kin, which led to the Kin Rewards Engine, another novel idea of giving developers an economic incentive to build on a crypto asset. That idea has very much come of age now.

After giving Kin to the ecosystem, and selling the Kik messenger, Ted and the team behind Kik and Kin, started a non-profit to build the killer app for Kin, called Code.

After two and half years of iterating and building, they have formed a new for-profit company called Code to bring to market a global payments app, also called Code. And they have raised a round of financing to support the go-to-market effort.

You can see Code in action by scrolling down here and you can download it here.

We are very bullish on payment applications being built on web3 rails. The Code team has a novel and different approach to the market that we are excited about.

And, of course, we are always eager to support a team that we have worked with over a long period of time and built strong and deep relationships with.

About a year ago, the USV partnership kicked off a process to articulate an overarching thesis for how we invest across all of the sectors we are active in. Over the years, we have broadened the aperture of where we invest but have approached each sector with a similar angle. We wanted to find the words to articulate that angle and put them on the home page of our website and front and center in our minds.

That process culminated in a blog post that Nick wrote and posted yesterday. You should go read that entire post. It is excellent. But to summarize, we chose these words to describe what we invest in at USV:

USV invests at the edge of large markets being transformed by technological and societal pressures

Each word in that sentence was chosen for a reason but two of them are worth calling out:

Edge - we want to be investing at the edge of markets. We have found that attacking the status quo with a full frontal assault is difficult. Making an end run around it is a lot easier.

Societal - most people think VCs invest in technological changes. We have found that our greatest returns come from societal changes.

A single sentence can say a lot and we think this one does. If you want the detail and context behind it, go read Nick's post.

We have all been targeted by ads that you look at and wonder “how do they know I am in the market for that product?” The answer is that the AI/ML models that big tech companies have trained on our personal data are incredibly accurate and powerful. 

There are two problems with this:

The first is that “our data” which they use to train their models actually belongs to us but for two decades now, we have been giving it to big tech companies.

The second is the models that are trained on our data belong to big tech even though they are trained on our data.

It doesn’t have to be this way and I don’t believe it will be this way for much longer.

Web3 will help.

Let me explain.

If you go to zora.co, you will find a social feed that feels like Tumblr, Instagram, Facebook, etc that you can scroll through and like the things you see. But there is one difference, liking is called minting on Zora. You don’t just tell the creator you like their work, you send them a tiny bit of money and you get to own a copy of the work.

It may not seem like much, but the difference here is that you own one of the things you liked and you paid a tiny bit for it. If the creator gets a thousand people to do what you did, which is not that uncommon at places like Zora, they make a nice bit of money on their work.

And the collector is building their own data set that they own. It is on the blockchain and it belongs to them.

The next obvious step is for companies like Zora to offer collectors the ability to train models on their collections. This turns their collections into training data sets. But these are training data sets the collectors own. Not training data sets that Zora owns.

It won’t be long until we have open-source AI/ML models that we can run on our phones. These will be our models and we can train them on our data sets.

Consider this blog post. You can collect it too. There is a green button on the upper right of this post that says Collect. When you click that the same thing happens here as what happens on Zora. I get a tiny bit of money and you get your own copy of this post. 

Below is a screenshot of an Ethereum wallet I have connected to this blog. You can see some of the collecting transactions from this blog over the last week or two.

So what is going on here?

1/ Writers are getting paid for their work

2/ Readers are building a data set that they own, On Chain. Not on Facebook.

The next obvious step is for us to have our own open-source models that we train on these collections we are building.

These open-source models will help us write, find new things to read, and more. It can inspire us to start a new company, invest in a new company, listen to a new song, find artwork to hang over our fireplace and many other things we want to do.

Going back to Chris Dixon’s words in yesterday’s post:

in the long run, we are still going to need an economic covenant between AI systems and content providers. Al will always need new data to stay up to date. The world evolves: tastes change, new genres emerge, things get invented. There will be new subjects to describe and represent. The people who create content that feeds AI systems will need to be compensated. 

There is a way forward that works for writers, readers, collectors, creators, and everyone.

It starts with us owning our work and allowing others to pay us to collect our work.

The thing that makes me so optimistic about this is that it is not some dream. It is happening right here on this blog. The tools we need to change the way the world works are already here. We just need to start using them.

My next post will be about how we get more people using these tools.

If I asked you what the native business model for content is, you'd probably say either advertising or subscriptions. But I am starting to think that AI is to content what search engines are to browsers. Money machines.

I was emailing with my friend Lock a few weeks ago and we were talking a bit about my 2024 predictions post. I made reference to the section in that post about AI and litigation and said:

maybe we will get a settlement that makes all the big AIs pay 2/3 of their revenue to content companies and writers and we will have the native revenue model for media!

I was only half joking. 

When the Hollywood writers went on strike, I suggested to all of my writer friends that they should be happy to let AIs write films and TV shows as long as they get paid to sit home and do nothing under the premise that the AIs were trained on their work and so they are due royalties.

I was only half joking about that too.

In Chris Dixon’s book, Read Write Own, which I wrote about a few weeks ago, he said this:

Most current AI systems have no economic model for creators... in the long run, we are still going to need an economic covenant between AI systems and content providers. Al will always need new data to stay up to date. The world evolves: tastes change, new genres emerge, things get invented. There will be new subjects to describe and represent. The people who create content that feeds AI systems will need to be compensated. 

I could not agree more.

The only question is how this will come to be.

I think web3 is sitting on the answer.

Tune in tomorrow for more on this.

The Partnership for NYC, alongside its partners at the MTA, the Port Authority of New York and New Jersey, NJ TRANSIT, and NYC Department of Transportation, launched a call for applications for the 6th annual Transit Tech Lab this week.

To kick off this year’s program, the Transit Tech Lab is seeking early and growth-stage tech companies with compelling solutions to one of three local transit system challenges:

• Customer Experience Challenge: How can we improve customer experience by better communicating service changes, reducing delays, and augment safety and cleanliness initiatives?

• Resilience Challenge: How can we build a more resilient and adaptive transit system? 

• NYCDOT’s Curb Activity Challenge: How can we maximize the city’s curb space to serve the multiple and varied needs of New Yorkers? 

 Representatives from each participating agency will evaluate applications based on the technology’s impact and the applicant’s product, team, and overall value proposition. Finalists will advance to conduct a proof-of-concept over an eight-week period; the companies demonstrating the most compelling technologies that align with the agencies' objectives have the opportunity to secure a yearlong pilot.

Applications are due Wednesday, February 28.  Interested applicants are invited to attend an information session on February 1 at 1pm ET.

If you know of a company or emerging innovator that would be a good fit for this year’s Transit Tech Lab, please let us know about them via email or encourage them to apply here: https://transitinnovation.org. 

Last summer I sat down with Tom Secunda, who co-founded Bloomberg LP with Mike Bloomberg, to talk about areas of shared philanthropic interest. Tom told me that academic institutions do not have access to the kind of AI/ML infrastructure that the top tech companies have and he wanted to fix that. His idea was a consortium of Universities in New York State, the New York State Government, and philanthropic donors. His vision was a large shared facility in upstate NY with state-of-the-art AI/ML infrastructure that participating academic institutions could make available to their faculty for cutting-edge AI/ML research.

Tom is a convincing person. He convinced me that this was a good idea last summer and he went on to convince Governor Hochul and the top Universities in New York State and his fellow philanthropist Jim Simons.

I am glad Governor Hochul and her team were quick to recognize the promise of this idea. Today, Governor Hochul will announce Empire AI in her State of the State Address.

Empire AI will be a "state-of-the-art artificial intelligence computing center in Upstate New York to be used by New York's leading institutions to promote responsible research and development, create jobs, and unlock AI opportunities focused on public good."

Over $400mm of public and private funding has been committed over ten years to build and operate the Empire AI facility. New York State is contributing $275mm and over $125mm is coming from participating Universities and philanthropy.

I am excited to see New York State step up like this. Other states, like Massachusetts, have done something similar but this NYS effort is significantly larger. I expect more states will follow now. Cutting-edge AI/ML research should not be limited to large tech companies. We need our academic institutions to be on equal footing. This model, particularly if more states adopt it, can help make that possible.

New York is one of the leading AI centers in the US, along with California and Massachusetts. We see this every day as entrepreneurs building AI companies come knocking on our door. It is very encouraging to see our local government supporting and investing in this new area of economic development.

I want to congratulate Governor Hochul, the leaders of our academic institutions, and Tom Secunda, for their vision and initiative here. This is important.

Chris Dixon, who leads the A16Z crypto fund, and has been an entrepreneur, VC, and friend of mine for over twenty years, has written a book called Read Write Own that is available for pre-order now and will start shipping at the end of the month. Chris gave me a copy right before the holidays and I read it over the last week.

I asked Chris why he wrote the book and he had two answers, one personal and one practical. The personal one is “I have focused my career on investing in blockchain networks. During the recent downturn, I felt a need to rearticulate to myself why I am doing that.”  The practical one is “I want to explain blockchain networks to young adults who are thinking about where to start their careers, to the mother of the software engineer at Coinbase who wants to understand what her child is working on, and to lawmakers and regulators in DC who need to understand why they are important.”

What Chris calls Blockchain Networks, I call Web3. The term Web3 is important to me because my investing career first took meaning during the initial phase of the web, which I think of as Web1. It took off during the second phase of my career which many call Web2. And I’ve spent the last decade of my career imagining what a better version could be, which I call Web3.

Chris takes the same journey but he calls these phases Read, Write, and Own. The initial phase of the web, when the web browser arrived, was mostly a reading experience. Then in the early 2000s, the web became two-way and we could Read and Write. What Blockchain Networks have unlocked is the ability to own things on the web. You can own your identity. You can own your social media posts. You can own your money. You can own your art. You can own your music. And so on and so forth.

Chris’s book has three parts. The first part is a history of the web and how we got to where we are right now. The second part is a detailed description of what makes Blockchain Networks work and why they are important and powerful. The third and final part is a series of descriptions of new kinds of applications that are being built on Blockchain Networks.

While I enjoyed all three parts of the book, I was energized by the final section. Chris imagines a future that is very different from where we are today. It is one I very much want to see emerge. I think you will too.

You can pre-order Read Write Own here.I encourage you to do that. I expect you will turn that last page and be excited, like I am, about what is coming now that we can own the Internet instead of it owning us.

2007 was a heady time for USV. Web2 was finally happening, four years after Brad and I spent 18 months telling the world it was coming to mostly deaf ears. We finally raised our first fund at the end of 2004 and three years later things were finally coming together and quickly. Though we made investments with a much bigger impact during that time, the one I loved the most as a user was Tumblr. Every morning I would wake up and scroll through my feed and find amazing thoughts, images, music, and more. Sadly Tumblr did not transition to the iPhone/mobile world and was displaced by things like Instagram and TikTok and SoundCloud, but for a while, Tumblr was the greatest thing on the Internet and I loved it.

That's when we first met Jared Hecht, who was employee number eight at Tumblr. During Jared's time at Tumblr, he, along with our good friend Steve Martocci, attended a Twilio (another USV investment that I have huge heart for) hackathon and made GroupMe overnight which became an instant sensation and then a company and then an exit to Skype/Microsoft.

Tumblr and Twilio and web2 and what you could do with all of this stuff was a time of infinite possibility. A lot has changed since then on the consumer web but the friends we made then have stuck and today Jared is telling the world something we have known for a few months and that is that he is joining USV as a Venture Partner.

I think we are at the beginning of another heady time, as web3 and AI present the opportunity to make a new internet that, like the early days of web2, has endless possibilities.

So Jared joins us with a decade and a half more experience than when we first met him, two successful startups that taught him so much, but also with the memories of the early days of web2 and the pattern recognition that comes from it. We will need that right now. Because it is opportunity time again on the consumer web.

My colleague Nikhil has a great post up on the USV blog about NFTs and why they are here to stay.

I particularly like this graph that shows how monthly unique minters has grown steadily throughout the crypto winter even as volumes have declined massively.

It is a classic hype cycle where the bubble bursts but the underlying thing just keeps growing. One day we wake up and the market that almost everyone has given up on is not just alive but stronger than ever.

I also very much like this from Nikhil:

The net result of these improvements is that the aperture of what NFTs can practically represent is opening quickly and interacting with NFTs is becoming ever cheaper and easier. We now have the tools to, in many cases, abstract the technology altogether and have users engage with digital experiences that are silently backed by NFTs. Art and collectibles are just a piece of the puzzle, and any digital artifact in our lives can – and possibly eventually will – be represented by an NFT.

USV has been investing in NFTs and NFT-related technologies, projects, and companies since 2017 and we never stopped, wavered, or flinched. Nikhil's post starts with something I wrote back in 2017 and believe even more strongly today:

We think digital collectibles are one of many amazing things that blockchains enable that literally could not be done before this technology emerged.

Most everyone thinks NFTs are images of silly apes, something to laugh at, but yet the reality is they are the atomic unit of digital ownership in the 21st century. Once again, the thing that we laughed at turns out to be the big thing.

As we enter 2024, the capital markets have found their footing and are moving higher. The Fed has taken interest rates as far as they want at this time and inflation has come down. It seems that a “soft landing” is likely. That is good news for the innovation economy because healthy capital markets are a necessary support system.

However, optimistic capital markets are necessary but not sufficient for a healthy innovation economy. We also need innovation. The good news is we have a lot of that and more is coming in 2024. I have never seen an environment with more innovation in the forty years I have been in the tech sector. It is breathtaking to see.

Let’s start with Artificial intelligence (AI) which was the big event in 2023. The AI “stack” has emerged with Large Language Models and other important models (like audio, imagery, video, etc) operating in the cloud with well-documented and supported APIs that are available to developers to build on. And possibly even more important is the emergence of very good open-source AI models that in many cases can outperform the closed-source models. With the AI stack well developed and supported, we are moving into the application era of AI, much like the browser brought us the application era of the web and the iPhone brought us the application era of the mobile device. This is a big deal. While in 2023, everyone was rightly focused on the large language models like OpenAI, Anthropic, Gemini, Llama, etc, we will see new AI-first applications emerge in 2024 that will start to move the focus and the conversation up the stack. And we will see legacy applications embrace AI to make their products better and to remain competitive with the AI-first disrupters.

But like web3 before it and the internet before that, this new technology will bring litigation and regulatory scrutiny that will raise, and ultimately resolve many important issues. Let’s start with litigation. Should I, as the author of over 9,000 blog posts that have been used to train these large language models, be entitled to some of the revenue they will make? OpenAI generated over $1.5bn in revenue in 2023. Should I get some of that? And do I need to join The New York Times and other publishers in suing to get some of it? That is just one of many issues that these AI models have raised and they will need to be resolved. I believe it will take years of litigation and regulation before we understand what the appropriate business model and norms are for the AI economy. But fortunately, like web3 and the internet before it, the tech sector will not wait for those issues to be resolved. Trillions of dollars are being invested in the AI sector and that will continue for as far as this eye can see. Innovation never waits for rules and regulations. But it eventually gets them.

That’s a good segue to web3, which has seen a full frontal attack from regulators and lawmakers in the US and elsewhere. 2023 was the year that web3 held its ground and 2024 will be the year that regulators and lawmakers come to terms with web3. We will finally start to see regulatory clarity emerge in the US like has happened in the EU and elsewhere. 

But as important as regulatory clarity is to web3, it pales in importance with the need for a “ChatGPT moment” for blockchain-based technologies. AI developed for over forty years before its coming out party. I think it will take web3 less than half that time. Satoshi gave us the playbook to build a decentralized internet stack back in 2008 and I feel quite confident that we will have massive mainstream applications running on this decentralized stack well before 2028. I think we will see mainstream decentralized applications emerge in 2024 as we now have inexpensive and fast transactions and simpler user interfaces. Vitalik wrote a nice piece about this a few days ago.

AI and Web3 are two sides of the same coin. AI will help make web3 usable for mainstream applications and web3 will help us trust AI. Together they will lead to a more powerful, more resilient, more trusted, and more equitable Internet. 

But none of that will matter if we don’t accelerate our focus on our warming planet. Earth continues to warm at a faster rate than has been predicted, causing increasing pain and suffering across the globe. It is hard for humans to react to something that is thirty years out. It is a lot easier for humans to react to something that is happening to them right now. So this pain and suffering will force an acceleration of the energy transition from carbon to clean energy.

The energy transition is being powered by innovation in energy generation (renewables, nuclear, etc), energy storage (batteries, storage networks, etc), and smarter energy distribution. In the process of rebuilding the infrastructure and systems by which we power this planet, we are also modernizing the energy stack and making it decentralized, modular, and programmable. If you think you’ve seen this movie before, you have. And the good news is that there could even be a happy ending if we move fast enough to make this transition happen in the next twenty years.

The new energy stack has been coming together for the last decade but slowly and very much under the radar. I believe that 2024 will be a coming out party for the new energy stack and I am excited to be investing in this area and helping to make it happen.

So if we have healthier capital markets and more innovation than ever, what is up with the venture capital ecosystem? Well, that’s not such a happy story. Limited Partners, the folks that provide the capital to the venture capital funds, have taken a beating over the last few years and are cautious right now. In addition, we are seeing many large firms scale back or even shut down. And new firms are struggling to raise funds. This is a rationalization of a sector that got very big very fast in the last decade and will need time to find a new normal. Because venture funds have a ten year life but often take much longer to fully liquidate, the venture capital business changes more slowly than the businesses it funds. I think we are a couple years into a transition that will take at least the first half of this decade to play out.

So while the capital markets will likely be robust in 2024, I do not expect that venture capital investing and venture capital fund formation to grow that much year over year in 2024. I think both will grow but not nearly as fast as the sectors that surround VC.

To sum it all up, we are in a golden era of innovation with AI and Web3 leading to a new more intelligent, resilient and decentralized Internet and the emergence of a new energy stack which will power our lives new ways that will not continue to warm our planet. There are opportunities every which way I look to back founders and founding teams building these new technologies. I think 2024 is going to be a terrific year for tech.