Web3 Funding Insights & Market Trends 2024

In this episode we looking backwards to capture Web3 funding insights and look forwards to market trends for 2024.  We'll unlock the future of digital finance and Web3 in this transformative discussion with Outlier Ventures' brain trust, Ruth Galvin and Jasper De Maere. Get ready to navigate the intricate webs of blockchain's impact on sectors from healthcare to supply chain, as we dissect the careful dance between founders and VCs, and the creative resilience that shapes tomorrow's technological advancements. This episode promises a treasure trove of knowledge on securing investment in a cautious market and forecasting the trends that will define 2024.

Step into a world where the tokenization of everything from private debt to equity is not just a possibility, but an emerging reality. We traverse the digital landscape, examining how major players like BlackRock are pioneering the melding of AI, blockchain, and Real World Assets, heralding a new phase of maturity for blockchain industry. The episode also casts a critical eye on the ramifications of AI advancements on job markets and the vital importance of aligning token projects with sustainable business models for a future that's ripe with opportunity.

As we wrap up, we tackle the practicalities that every Web3 founder should arm themselves with, from pitch strategies that resonate with investors, to the alignment of product and token for enduring success. We look ahead, predicting an upcoming year where more builders will emerge triumphant in fundraising efforts, driven by the convergence of AI, blockchain, and real-world assets. If you're keen to glimpse the horizon of digital assets and Web3, this is one discussion you can't afford to miss.

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The Startup Journey podcast is dedicated to spotlighting the journeys and insights of tech founders and investors shaping Web3. Guests of The Startup Voyage podcast join a world of industry leaders, startup visionaries, and seasoned investors who share valuable lessons, stories, and advice to inspire and empower a global community of tech founders.​

We take a journalistic / reality show concept to ignite conversations that empower the next generation of disruptors. Join us as we dive deep into the dynamic world of technology, unraveling success stories, industry trends, and game-changing innovations.

Transcript

Arthur Lee: 0:00

Hey everyone, welcome to another episode of the Start of Voyage. In this episode we're going to be engaging in some discussions around Web3, which is coming back to life after a very long crypto winter. We're going to be talking about some insights from two experts in the field, ruth Galvin and Jasper De Maere, both from Outlier Ventures. Now Ruth provides a detailed analysis I guess she can provide that to us, to the audience the current funding landscape, which I think has changed. We'll talk about that how hard or how, what the challenges are in raising money for Web3 projects and then considerations for founders and strategic competitive positioning for these projects to successfully get funded. Now with Jasper, he's a researcher for Outlier Ventures and he's done a really nice piece around real-world assets, which has come back to life Once again. We will talk about that, the different frameworks that are being developed to support real-world assets, and we'll look at some in-depth exploration into cutting-edge trends and innovations in this space. This episode is going to get started. Welcome both of you to the podcast.

Ruth Galvin: 1:34

Thanks, jasper, great to be here. Great hey, jasper, thanks for being here.

Arthur Lee: 1:39

No worries stories. Maybe you can just give your general impressions. It'd be interesting to understand your perspectives and how you see this year 2024 shaping up. Of course, lots of new noise, lots of new narratives that are out there, mainly with the Bitcoin being at 52 and the having come up is one of the biggest news for this year. I can hear from each one of you what do you think?

Ruth Galvin: 2:05

Yeah, happy to go. First, looking back on 2023, I feel like 2023 was a big year in a number of ways. I mean some big news events. Looking at the fundraising landscape as well, quite a lot happened. It was, I guess, what I might call a little bit of a crypto winter system, of that your bear market. So quite a challenging time for builders over that period.

Ruth Galvin: 2:30

Looking at, like you said, what's happening in the fundraising landscape, I think when we look at where the three fundraising, you have to also keep into perspective what's happening within the global VC landscape and across the board. It was also quite a challenging time. I mean global VC market tumble. You're quite a bit in 2023. And VC and VCs are a lot more sparing with their trip harder and doubling down on the due diligence before they really invest in teams. So that also comes through in the WM3, web3 funding. With that being said, with an outlier.

Ruth Galvin: 3:06

We also saw it as being a time when we saw more builders actually coming into the space, more builders applying to the accelerator programs. So they do say bear is a time for builders and yeah, we definitely saw that. So I think to your question, looking to 2024, I feel like it. We're really seeing some positive signs within the Web3 fundraising landscape. Vc investment has kind of ticked high in the last quarter and it feels like there's a different mood shift. Positive sentiment around Bitcoin ETF news you mentioned the halving coming up as well in April fundraising news picking up. So, yeah, it feels like it's set to the I'm sure, an interesting year, but more of the optimism that's also there.

Arthur Lee: 3:51

Okay, jasper, what do you see this year?

Jasper De Maere: 3:55

We definitely echo what Ruth said. So I think 23 and 24 can be more different. We're only two months in right, it's just completely different. The Bitcoin is also like. In 22, 23, I think all of Web3 builders were basically like licking their wounds, continuing to build some rich, massive coolos because it's not that easy. And now I think in 24, as the landscape heats up, as general investors are coming back, they could just all of a sudden come out with a slew of headlines, high quality stuff, which they've been building out itself for the last couple of years. So I think we actually see like a rising amount of exciting headlines, simply because they but in overall, like builders weren't fully convinced to share the amount of audience with the audience.

Jasper De Maere: 4:44

So I think that's also a reason why we see this sudden fraction of excitement, like all this news is coming out. There's a lot of verticals which we're excited about, so it's 24, and hopefully like off the net as well, like it's shaping up to be very interesting one.

Arthur Lee: 4:59

Right, well, ruth, you're a base camp manager for the event that Excel, and you just mentioned there's a lot of new projects coming on board. So you're mentioning that there's a lot of builders coming in. I guess are they infrastructure projects and like maybe PK, zip or securities type of thing, layers? What are you seeing as, I guess, the trend, what's going on, or what are you guys looking at for 2024?

Ruth Galvin: 5:22

Yeah. So maybe it'll be helpful if I, if we are forced with the audience that might not know so much about our live ventures if I give a further overview. We are. So we're the global leading Web3 accelerator and one of the most active Web3 investors by volume. So we see a lot you know within this space and a lot of trends over that period without accelerate, over 278 companies and you're somewhere which has expanded to multi-billion dollar economies, such as new FETCI economy kudos. So, yeah, we've seen a lot you know over the bill and the beer with the net.

Ruth Galvin: 5:56

Like we also run a number of these base camp accelerated programs, so kind of 12 week accelerated programs where we provide your 360 degree support connecting with ecosystem players, mentors and really how founders grow their business and take it to the next level. So, so, yes, we run different programs. Either we'll partner with protocols or run more thematic base camps, like the AI base camp, ai crypto base camp that I'll be leading the real word assets base camp that Jasper wrote the thesis for. And when I look at the past quarter so last quarter I was running the Walmart programs we partnered with Walmart's Incubationer and we saw, kind of month on well, quarter on quarter, the number of startup applications had just been steadily increased. So for that Walmart, you know, program we had, we had the most to date, really, of startup founders applying. So I think that's, you know, a really positive, positive sign. That's looking, you know, to 2024.

Arthur Lee: 6:59

Ai will be one of the big programs, real word assets, and we've got some others will be on the horizon, so it's definitely keep an eye on the watchlist, okay well, I think it's interesting when I go out into the crypto like events and when I talk to people about what's going on in the space, there's always a segmentation between people who are looking at it purely from an investment point of view and others that actually are thinking about it from what's going to be next to actually solving a problem or what's going to pick up some more product market fit. So some of the narratives I just read you know it's all over Twitter and they're all very like everywhere right in the web space. Of course, ai is still very big, especially with the amount of, or the announcement of Sora, you can only imagine the amount of computing power to the GPUs that will be needed in the market. I mean, those stocks have just skyrocketed with Nvidia and micro computing. You've got deep in ERC 404, brc 20, real-world assets, as Jasper has already done, his thesis on modular L1s and restaking.

Arthur Lee: 8:07

So these are some of the narratives. But then when I hear this it's always like a can I, is there a project working on these so I can invest in them? But they're to me they're more looking at it from a speculative point of view and wanting to, you know, make some money off some project, right, but from outliers venture like, what would you look at? I mean, you must also look at the narratives that are going out there, and I guess it's not so much that you guys are shopping around for projects. You're trying to pull them into the accelerators, right? Is that how it works?

Ruth Galvin: 8:35

Yeah, yeah, that's right.

Ruth Galvin: 8:37

So we do look at it from you know the investment lens, because we invest into the startups but the stage of the startups can be very early stage to later on and really look at what is the potential of the team of you know who are the founders, are they solving a problem or is there the you know desirability within the market that's going to be there. So definitely look at it from a few different lengths when we're, you know, deciding to invest in the team and bring them into the program. You know I think you mentioned some of the examples there we had a team called Exibites in our IHS program and they're a decentralized, you know compute platform and they were they were doing really great. So they're an example that graduated just last year of you know founders having really good what are they called, kind of the founder product fit. So you know, right founders within the right product and, yeah, some of the teams like that were really excited about and wanting to invest in your more going forward, particularly with you know their program and things like that.

Arthur Lee: 9:42

Okay, well, I think I've read some news about, I guess, year and year numbers on venture capital funding into the Web 3 space and it's a little bit lagging, of course, and it seems like it's increased like slowly increased even though, but like single digit numbers. But, jasper, I guess, in real world assets, like I was in this space when I moved towards the last crypto winter, I moved towards, like, security tokens and I really thought that everything is going to go towards that space working with I was working with license exchanges, tokenizing, you know, I guess, stops, bonds, things like this very traditional product. In your research, I mean, what do you seeing as in 2024, what will come to light as a, I guess, a significant innovation for the support of RWAs and bringing it to market?

Jasper De Maere: 10:29

Yeah, yeah, yeah, no, definitely. I think for the people that spent close attention to the space, they're quite familiar with RWAs like they've seen it in 1617, like the narrative is quite hot, with the likes of a trade lens, for example. Like that it was used in trade to track and trace for supply chains. We think they're structurally different now. There's a couple of reasons, I think. First of all, it's the increase in mind share, where retail is not the only the retail and founders are not the only ones that are actually excited about this. You have large corporate stepping in and financials are leading the way, but they're closely followed by companies in supply chain media companies, healthcare companies to use it for data, for example. There's interest across different sectors, but obviously financials is leading the way. But what you need and that's the big difference now is you have asset holders that are actually interested in this, because that's the difficulty with versus other sectors like, for example, gaming, where you just need a nice product, exciting users. You need asset holders Do actively desire the creation of digital copy of their assets on chain right, so this has changed in. The second one is the regulation. There's more regulatory clarity, while no necessarily seen that way for the listeners in the US if you step outside of the US, there's more regulatory clarity. I think the big one, for example, is me coming online at the end of this year in Europe and then also I'm you guys doing A lot with the FCA to get regulatory frameworks in place and in Asia is still like I feel like they're from trying the regulation quite a bit and then last year would say the technology center better in a better space. I think in terms of throughput, security, all these things which are very necessary for large corpets to have a higher degree of confidence in the technology, has come online. Like you have to scaling, you have a lot of L ones, although in day it's all the way out once.

Jasper De Maere: 12:31

Ecosystem development there, all very exciting stuff which will, I think, give us another go with RWA and to your point that to what I mentioned earlier, as well as that, I like we spend a lot of time Like at the ground level of the ecosystem, so you spend a lot of time, but we find a lot of builders, people who generally just following the space very closely. There is a lot of headlines coming out and the last year, beginning of this year, it's an exciting space to look at really is becoming more work tree, or previously I would say it was like 2.5. It was basically traditional industry using a new type of data, but now, you see, like the idea to decentralize these infrastructure platforms as well. So there's a lot of stuff falling in place quite quickly, so I wouldn't be surprised if if obviously like, the credit helps and you see headlines from the largest usual players as well.

Arthur Lee: 13:30

so this is all a and she be quite nicely for the cycle well, do you see like a then separation in how people are coming up with innovations meaning, like you said, financial is leading the way it has been and it will probably continue with the Bitcoin ETF, and perhaps the next step would be thinking about how to tokenize private debt or equity things like this. Right, because these are things that you know, if you've got black rock now involved in digital assets and supporting the space, they're most likely going to look at supporting what already exists and making that more efficient, I guess, to a, a global capital market. But then there's other side of things of people looking at just simple efficiency around dematerialization, reducing intermediaries and reducing costs. So these are more on the very process driven levels. Do you guys look at it from all different angles, I guess, or what do you see is is going to be most important for 2024.

Jasper De Maere: 14:26

Yeah, it's a big part of our thesis actually, because we had a feeling that before we even started writing it, like looking up to us at the system, obviously be followed it for us but never do the extent we did. Now we're very, very active. To us like it felt that a lot of the headlines like 99% of headlines were all about financial assets. So we wanted to take a step back and look at the technology and its value proposition, holistic, across all industries. So we run back because that back we also sell like okay, what is the core value proposition on this technology? Where has it? Where is the potential to be applied? Financial industry is just a very big fit.

Jasper De Maere: 15:07

So I think other stuff for very exciting about is the supply chain tracking there and already happens, why it's frequently like a government certificate is G tracking for sustainability reasons. That's also a big one. When I'm very excited, what personally is more on the individual assets. So I think data, like the organization of data and putting that on chain and then also intellectual property and the way that gets created and distributed, is very big. It also has a very strong fits where you don't necessarily have the Oracle problem, which is the fact that your program needs to represent your physical assets because these are already digital in nature. Data, by definitions digital and intellectual property for the past decades has been Stored on databases anyway, so because they're already digital, it's an easier fit right?

Jasper De Maere: 16:00

I think there's going to be a lot that's going to happen around the event message, especially beta, like, as you mentioned earlier, ai. So rock. A month last week like there's this is insaturable. The month for data points and having the ability to store these in more transparent way of blockchain, I think, is very strong, okay. Well, this is a question for both of you then.

Arthur Lee: 16:22

I mean, I've been listening to a lot of different podcasts. I listened to a lot of his futuristic thinking of like how AI is going to really change people's lives and what sort of jobs will have in a very, very short term future. What do you guys think about AI and it's in its real impact, as far as the projects that you're seeing and how they're implementing it?

Ruth Galvin: 16:45

Yeah, I'm gonna go through. Yeah, I think I'm just the trophy to jump in after. I mean, so something that that's kind of outlined in the thesis is looking at you know what is some of the structural issues within the internet today and and where can I and when we're through technology be quite complimentary and we look at how you're producing the internet is in our society? You know there's a lot of touch points, I think, to your question. One aspect also within the thesis that feels quite relevant is looking at kind of the changes with the UX and the kind of the user experience, ui, ux and how AI will Bring in new system of those new interfaces.

Ruth Galvin: 17:26

Already you know, with likes of chat to be tea and and some of these frontiers, you can see it's different user expect. Rather than going to Google search, you go to chat, to PT and it is surf, is the surfaces, information, just exactly what you need, and some you're some really good answers. If that's happening in the way to side, you know, I think the gap between your, the way to user experience, if we don't incorporate guy is also going to get bigger. So that's been a one component, I suppose that and the thesis you kind of dive into a little bit more. But yes, I'll hand over to you as well to go in the other I have.

Jasper De Maere: 18:03

I think it's a super interesting time actually, and do what we mentioned earlier, like there is a necessity for this to be to be happening as well, like there is a necessity for what treat me to be very serious about the AI capabilities and, ultimately, like the, the user experience, like expectations on user experience or chasing their changing rapidly right.

Jasper De Maere: 18:27

I think a very big war is all this. If you just take a step back and you look at what has happened in the past decades, the working on these have been developed in silos because they were used by very niche sub-segment of users power users, researchers and people who were just genuinely excited. Well, for the past, I think since GPT came online in November 22, that was really like the world's shed moment we've seen the diffusion of toy technologies like Steadley across society. Billions of users are adopting it and with the adoption comes also the realization of the limitations of the technology. I think previously concerns around data privacy, data security for AI and then for blockchain, it's around scalability, efficiency and usability Like the limitations there were really appreciated, but now that they fall into the average users' hands, which they're not power users, they don't have to be requested knowledge.

Jasper De Maere: 19:21

I think there is this necessity as well to solve the issues, because it is becoming like, if you rapidly adopt this technology, like we need solutions today data privacy, we need solutions today security and I feel like initially the debate was around regulation. So, if you remember, last year there were loads of sad hearings of big tech CEOs coming in and basically providing a lecture to legislators around. What are the implications, how does technology work? But less face it like. Regulating this is extremely difficult. So, rather than purely, I think obviously we are still of the view that you will need regulatory framework here for sure is a super national one, but alongside Dragon Nation, you have blockchain or any technology, any technological solution actually coming in to provide a solution to the shortcoming as well.

Jasper De Maere: 20:17

So I think blockchain and AI are quite synergistic in nature. Both deal with the same assets. They fundamentally deal with data. Ai is about extracting value from data. Blockchain is about storing data, and it's as well as in transparent way. So combining these into one tech stack is very it feels very natural. Obviously, there come a lot of difficulties with the actual implementation of this, but that's why there's so much excitement. There's a lot of excitement. It's very early days. People are figuring out these early issues, but the potential is very big.

Arthur Lee: 20:53

Yeah, yeah, I think for sure, media, social media, all this hype it does spur this anticipation that things are going to happen very fast. I think, like you said, the reality is there are limitations because they're still trying to figure it out. I think about, I guess, people I don't know. There are stories of people learning how to create bombs, right using AI, and now there's only certain things that you can do, like for doing chat, gpt and what it can provide you. But I think a lot of different platforms are already integrating AI to increased productivity, which I think is a natural way to go.

Arthur Lee: 21:28

But I had an interview with this guy, dr Duncan Wong. He actually does quantum-resistant computing, blockchain, and then he's been using AI for code audits. Then I asked him. I said, well, how useful is it really? He says, well, it's still early days. So, to your point, there's still limitations and it goes to go. Maybe it's the, like you said, data would be the big value proposition because you can have Google out there. Everyone has access to Google, but is that the most valuable information? The valuable information is probably on private chains, right? Or these private language models that potentially you're going to have to license, pay some license fees to access it. I mean, you got to create some separation between this high-value data and not just make it available to everyone. Do you agree with that? Do you agree? That's how it would go.

Jasper De Maere: 22:17

It is a very interesting view and it's a concern I have as well around democratization of AI, Because if it is such a meaningful approach to productivity, it will. If you aggregate it across, it's mainly impacting, like white core, even blue core, all industries. It will have a meaningful impact to GDP if you look at it like across regions right, Democratization of access to a base level of AI capabilities will become necessary, I think over the last decade, because you will have such a big increasing gap between the haves and the have-nots that it becomes virtually impossible for the have-nots to catch up in any meaningful ways. I think that's also a big element. The company mentioned earlier, like Exibite, said they do this on the GPU level. There they are democratizing GPU access through a decentralized model, but ultimately that also needs to happen for specific AI models, specific data sets. It needs to be a base level of access to make it a level playing field.

Ruth Galvin: 23:25

I think and maybe to build on that a little bit as well, I feel like for very much as white space where we are at the moment, a lot of these concepts are still in the academic realms as well, and for builders, there's quite a lot of design decisions of do they go open source or closed source and some different paths that then they can go down. So I feel like being very intentional with what founders are building and where is this going. All of the ethical considerations to bring into it as well is quite important in this space.

Arthur Lee: 24:03

Okay Well, I want to ask you, ruth, on your side, when you talk to or you probably meet a lot of founders, I'm assuming, in what you do In the past in my experience at least, when I talked to a lot of founders and I look at their pitch decks many times they will throw in these keywords right, like AI development or blockchain or whatever it may be right, I guess, in your. What factors should founders really look at? When I'm looking at Web3, the trends, what do they watch in? How should they build their ideas or solutions around what's actually happening in today or in the future?

Ruth Galvin: 24:40

Yeah, a good question. I mean, I think there's definitely a lot of buzzwords also in the Web3 space, you know democratization, decentralization, so I think, when it comes to the pictures, so we will see a lot of pictures and some pictures can really stand out, I think, a couple of commonalities with the pictures that stand out and some tips of founders also, you know, pitching is, I feel like, really focusing on what is the problem solving, or in some ways, the problem can be more important, actually at the earliest stages, than the solution that you're building, because if you haven't hooked someone on the why, the need, yeah, why are you doing this, then it's harder to feel a conviction with the solution.

Ruth Galvin: 25:27

So I feel like really starting at that is super important and yeah, I mean every company is a little bit different but looking at also the users. So is it, you know, is the solution that you're building also desirable for users? I've been looking at what to use that so you can kind of see me get into, I guess the desirability, feasibility in the business model, viability as well and kind of those three aspects coming together are some of the things that you definitely kind of look for in the pitch. So I think you know, summarize, if you can try and avoid some of the jargon and just be true with what you're really pitching, is key and you know what problem are you solving.

Ruth Galvin: 26:11

And I think wrapping that up, if you can, with storytelling, you know, I think information travels into the guise of stories really. So the most powerful pitches and founders you know, describing what they're doing, they can wrap it up, they can have a hook at the beginning of you know, something that captures the audience or the investor's attention, and those are the most memorable pitches as well. And I think back of your 100, or 10,000 pitches that we see.

Arthur Lee: 26:37

Well, I guess what you're saying is, instead of leading with buzzwords, you should lead with a solution that has some validation of that, that a need from somebody, right? So some addressable market, right? And if that's the case in many of the pitches that you're listening to, and do you think how important it is? You said storytelling is important, but is it just the storytelling or is it the emotion that elicits, right? So we all know sales, a lot of it is basically, you know, can they move you emotionally? And if they don't, you're not inspired, right, and you're probably like, oh, it's not a really good pitch. So how much is emotion playing to the storytelling in pitching?

Ruth Galvin: 27:16

I think emotion it plays a part in definitely in pitching and in so much that we do. There's a book I really like it. I can't remember the name off the top of my head, but it talks about your word of mouth book on a game of virality. It's definitely storytelling. It's definitely emotion. You know, when we share, when we care, we share. So if it's in kind of social media strategy, all these different things, if you can have some type of emotion that's there, we're more likely to also tell other people about it. It could be positive emotion, something that makes you happy or something that's funny or something that's sad or something that's happening in the world. When we care, we share. So I think that storytelling finding different triggers as well that makes you think of it, that makes you share there's a lot of those things that you can bake at into product design as well as along with. You know your pitch and storytelling Okay okay.

Arthur Lee: 28:14

Well, I guess, going to industry trends or market trends this is for Jasper, the projects that you look at or you've been researching in an RWA space, like how important it is, is it to keep up with what's for you trends? Because I would imagine, if you just focus on the problem itself, maybe it's not the trends you need to look at. You just need to look at the available technologies. That's going to help whatever solve your problem. Right, that's what people are supposed to do, like what do you see when they're looking at real-world assets? Is it more important to follow the trends? Or, you know, is it because a lot of these trends are could be too early, you know, early to the game?

Jasper De Maere: 28:56

Yeah, I think, like, obviously keeping up with trends helps. There's some, like it depends on where in the back-sector actually looking. I believe that, like, ultimately, you keep up with the trends as like just to know if this is a fitting technology solution for a problem you're tackling. But I think increasingly, as our tree which hers, we need to move to a point where, like, rather than purely saying that, that we need to start like selling the actual solution. The reason why I believe like this shift is finding out and it is because initially, like, if you look at the technology five years ago, there was a very big difference between, for example, the layer ones, the amount of truth with one good process over the other, or the consensus mechanism one used with the other was very different. Now, at some point, I feel like a lot of our ones is just like you have a lot of different shading of like capabilities, but all of them had like a baseline functionality, right. So, rather than like zooming in on like why it is still very much different, you just obscure that away and then you focus really on like what is the value of the technology I'm building? It is useful to stay on top, for example, in order to raise off like, for example, you have token standards. You have token standards which standardize the way your smart contracts are structured on like from like a technology level.

Jasper De Maere: 30:21

I think that that's very useful to stay on top of, but I wouldn't advise founders to really dive into rabbit holes of very like innovative tech and then lose sight of the bigger picture. I think If you read it, once mature, you have a toolbox of available, like, available technology there and try to build something with this. A lot of a lot of technology is destroying the future. So if something groundbreaking shows up, you like over the, you will probably hear from it without having to spend those times like looking at let me, let me, let me, let me, let me get this quarter. I think founders can stay. They can stay back and focus on their own solution while then having to spend a lot of time only being at shop.

Arthur Lee: 31:06

Innovation Okay, well, you talked about the importance of the intent was like data in IP. Do you believe that these things will be structured in a way to make it, I guess, more valuable or maybe tradable? Is there a model of like using NFTs with RWAs in some way?

Jasper De Maere: 31:25

Yeah, there's a little bit that's coming together actually Back in the key. For example, nft. I know what you mean by NFTs. Technically, each asset that's tokenized is an NFT, just because the asset is unique and like that's how you represent it on the chain. But a lot of it is coming together. I think also, like a lot of token standards are still being developed, like recently we had 404. It is again a unique take of like okay, you're C20s or your fringibles and then you have the non-fungibles in the 701. How does this look like a combination and like, for example, 404 is a very interesting example. Like I think it has a little bit potential implications around liquidity because that's a big, that's a big kicker for RWAs.

Jasper De Maere: 32:12

Right is like putting assets on chain to unlock the ability to have market formation around assets which previously didn't have these. Like if you look at market formation around assets, these are very much financial assets and non-funish assets or assets that have a high intrinsic value. So, like your property, you read the states what market formation around these assets is possible because these assets are so high. That's, the overhead cost associated with market formation is relatively low to the value of the asset. So what I mean by this is if you have, like your estate brokers and the entire ecosystem. These are all people who are fully full-time committed to creating a market around these assets.

Jasper De Maere: 32:56

The overhead cost of this is very high. You couldn't have this off around assets that have a low intrinsic value, because, as a percentage costs to the actual value of the asset, it doesn't make sense. That's where, like, blockchain technology comes in. It like shoots, work on fact execution, like the costs just drastically go down and all of a sudden, like inform the market, like more information is very difficult, even if you look at, like you mentioned earlier, like private assets, vc, private equity, private, like individual investments, like like just venture deals. Creating a market is there, like it's been going on for like. I think that in an offer, there's like proper commitment to do this, even at blockchain, and I'm yet to see like a seamless solution, like a lot of people are getting there, I think but, it just shows you that even if the asset is, like, intrinsically very valuable, it is still very difficult.

Jasper De Maere: 33:53

So solutions like 404 is for innovations that can push us forward and I feel like that's very interesting stuff come to them, and having these solutions only makes it more valuable to make the decision to go on to blockchain, I think for a lot of players Okay.

Arthur Lee: 34:10

Yeah, I ask you about the market trends because there's been a growing narrative around projects wanting to start building towards on Bitcoin ecosystem, right With the Orinals support of that that has launched last year, so now, because Bitcoin is the big player there's always been the big, most stable crypto in the market yeah, what do you think about that? You know, do people jump at the? Okay, we need to do this now. We need to see how we build on the Bitcoin ecosystem.

Jasper De Maere: 34:39

Yeah, it's one we called out last year actually. So I think we published our thesis in September, october, and currently we're in Q1, we're running a Bitcoin Covert. So we have eight companies on board. I think eight or nine companies on board were building different layers of the Bitcoin tech stack. So it is super interesting ecosystem to see, because I personally, like I think this is going to go very long way because some of the like I think we see strong similarities between what's currently happening on Bitcoin whereas happens on other chains.

Jasper De Maere: 35:16

In the past, like, we drew the strong analogy between Ethereum and like smart contracts going online in like 1560, subsequently like your ERC 701s unlocking NFT capabilities in like 2020, I think, 2021 can be learned from the format. But all this functionality is now coming to Bitcoin, which is just a completely different value proposition. The way, for example, nfts are minted on Bitcoin, like they're truly embedded, like the metadata, everything is stored on chain. There, for example, with Ethereum, you have pointers to like potential, like centralized database, so the value proposition is different. And if you have a differentiated value proposition, there are use cases that will find it attractive to build neural one.

Jasper De Maere: 36:00

And also like let's not forget, like Bitcoin is a trillion market gap assets, like there's plenty of Bitcoin sitting in people's wallets without functionality. It's just sitting there, it's not using DeFi, it's not used for anything. If you can add functionality in terms of like yield forming, even in a very like, like risk free way just like adding risk free yield Bitcoin, that's like your killer app. Like you have Bitcoin, we see the institutional then flow. So adding functionality for Bitcoin is going to be a massive one. I think this is sorry.

Arthur Lee: 36:34

Okay. Well, how about you, ruth, when you look at supporting the projects and the accelerator program? How important is it for them to look at the competitive landscape, or how do you support them, like what's going on, what tools are being used, and anything like that?

Ruth Galvin: 36:49

Yeah, yeah, I feel like for founders to know their competitors, know potential partners and really be embedded in ecosystem is super important, you know, even when it comes to investor conversations. So it's a common question. That's one of the first questions sometimes that come up, or at least the first three of you know, who do you see as your competitors and how are you different to them? Or what's your unique value proposition compared to X Y, z? So I feel like founders being able to answer those questions is really, you know, number one important for product strategy how to embed and kind of really differentiate what's the unique value proposition to others? And then also, secondly, be prepared to answer all of those questions when an investor asks you around the patch as well. So, yeah, really important and definitely see those questions come up a lot and I think by having a good understanding of your competitors, it means that you're more prepared when there's some key changes in the market.

Ruth Galvin: 37:55

You know we've had, yeah, sometimes, as an example, you know there might be a big news announcement about one of the competitors and then they'll have people asking them okay, what does this mean for you guys? Is this now you know this competitor competitor has a massive raise. I'm not so sure if I want to invest in you, because how are you competing? And if you know what that competitor is building and how you're different, you're more prepared to say actually, no, we're not competitors, yeah, potentially we're more partners or we're different in XYZ way. So it kind of means that you're already on the front foot and ready for some of those conversations and informing product strategy.

Arthur Lee: 38:35

Okay, Well, I think I'm sure a large part of the fundraising that happened in the last I guess, however, two years when there was a lot of FOMO happening, a lot of ECs coming into fun projects with no product, no traction, no validation of anything, but they were able to raise money. You know many of these have. The investors came in looking for a quick exit because there was a token generation event, right, and so they can just be out with a short lock period. But I guess these days, when you're looking at these projects through the accelerator and everyone's looking to formulate some business model to earn some revenue, how do you then support the projects to understand what business models work? And does it really need to be that different, because sometimes people are trying to create some really deep tokenomics system that really doesn't really need to be existing. I mean, how do you help with the business model side of things for the projects and accelerator?

Ruth Galvin: 39:38

Yeah, I mean, again looking at the past year, a lot of the heat has come out of the market so there might have been quite a lot of funding going into these projects and definitely seeing a change in that Within Outlayer. One of the first things we do as well when working with startups is really says do they actually need a token or not? Does it actually just not make sense at all for what they're building? So I think through the base camp, we really have that 360 view when we look at a startup. So we really have on the product strategy and the tech strategy and the token side of things.

Ruth Galvin: 40:17

Your product and token if the token does fit, really is quite it combines. So looking at those two in combination is super key rather than just isolated. So we'll always do that with the projects that we see and ultimately having a sustainable business model and does it really make sense for what they're building that is what will give the project longevity Super key. I think it comes back to those three things as well. Business model, viability, feasibility and desirability are really key elements.

Arthur Lee: 40:57

Okay, Based on desirability. Then how do most of the projects go out there to see if there is real demand to validate the product? Like? What type of like top three tactics people are using?

Ruth Galvin: 41:09

Yeah, so good question and some ways, one of the most important things, because it really dictates basically what you even build. So some of the teams that start off from a very beginning so it might be there in a hackathon and they go before they even they might have some kind of big problem or they might not they might just go around and actually just start talking to people and find out are someone is missing this tool, they wish they could do X, y Z faster, better, cheaper, so they find the need. And then I think like really getting on the ground, speaking to people straight away and try whether it's something on a dissipate that and going out on the streets and trying to get some validation before you spend a lot of money on actually building a solution. So, yes, move out our portfolio companies. It's been hackathons or lots of customer customer testing Great.

Arthur Lee: 42:04

So I guess, when it comes to mainstream of dutch and this is for Jasper and real old assets, when I mentioned before I worked for a license exchange he actually put the market a couple of products, and one was actually a bond, actually never went out to market, it got killed, but it was a $3 billion bond. It was fractionalized so then retail customers could come in at a $100 buy-in for some guaranteed interest rate, about 1%, for a three month maturity date. Usually in this case for banks, when it's offered by them, the minimum buy-in is like $100,000 USD. So it made it very attractive. It makes it kind of make it available to more people around the world. But it was supported by a bank, a state owned bank in China, and when they heard that we also sold crypto they kind of killed the project.

Arthur Lee: 42:54

But anyways, the whole point I'm bringing this up is that it would have brought a lot of mainstream adoption. I do believe there's actually a lot of interest, even from local retail banks that they had people that just want to park their money for three months. Just some guaranteed interest, very safe. In your research, in your opinions, what do you think is required to gain adoption of real-world assets? Does it need to be something that is solving a solution for today, or is it driven more based on financials?

Jasper De Maere: 43:27

Yeah, I think, for example, in what you mentioned earlier with the organization of the BALT, in order for users and retail to really adopt this, I think there just needs to be a strong desire to own the underlying asset in the first place, because that's a little bit of difficult for us. If you are selling the fact that it's cryptocurrency or a digital asset, you're selling to the same people who have been buying your traditional cryptocurrencies, your utility tokens, and it's basically the same crowd switch. It's not a broad-based adoption at all. In order to find adoption, the technology which allows people to buy it is completely abstracted away. The people that don't necessarily know that it's being traded on blockchain and on the same side, from the UX UI perspective, web 3 wallets, which I feel like, definitely from a user perspective.

Jasper De Maere: 44:22

Over the past two, three years, there's been some very good improvements. We're going mobile first. The UX UI is less secure, but it's becoming user-friendly. But there's still some way to go. Those two things need to fall in place. It needs to become very usable and also, I think issuers of the assets need to think about the true desire to own this asset. It shouldn't be because it's on blockchain that, all of a sudden, a one or two percent yielding fixing the instrument becomes exponentially more attractive just because that's the way it's represented in your portfolio. It needs to be from the utility of the underlying asset or the financial profile of the underlying assets.

Arthur Lee: 45:07

Okay. Well, you're going back to what you had mentioned. There's like okay. So if you think about total wallets around the world compared to accounts at brokerage firms or banks, right, obviously it's probably like one percent or less Mainstream. You're talking about everyone else in the world. With the introduction now, with Bitcoin ETF, none of those guys will own a wallet. They just go to the brokers, they want exposure, they buy it and then they're already connected to their online account. It has nothing to do with. Do I need to manage a cold wallet or any of that stuff? Do you think that the wallet, like you mentioned, are they really necessary for the end?

Jasper De Maere: 45:48

user. I think we're basically in flux, right. I think you're at the stage where you see it is not a linear buff, it is not like Alice. So from like non-like factory to factory wallet, I mean for like a switch over, like overnight or even like a couple of years. It is gradually. That's because, for example, work through is so difficult. It's like the factory wallets is not for everyone, but there's still this desire to own Bitcoin. That's like ETFs came into place, it's just true. Financial implies it very easily to then they exploit it right. So that's a little bit of the idea of what's going to be happening. If you push that forward, then you look at, like the underlying trends that's happening. There are big asset managers actually a lot of them who are looking at tokenizing and who are looking at spending on their own factory wallets. They have likes of, like Franklin Duncan, wisdom Tree. Wisdom Tree already did this. They tokenized some of their fellow offerings and then they issued NFTs which people can have in their factory wallet. It's not their assets, as in the NFT, representing the funds is not a legal claim to the fund itself, while there is reflection of the value. But that's a start, right. So it is a start to get people acquainted with the idea of a factory wallet.

Jasper De Maere: 47:05

But ultimately, I think obviously the private banking, well managed with industry, is massive. It's only going to grow over time. If you look at where banks are currently invested From that perspective, I think it pretty. Tf's are great for adoption, but you're right, something will never get the hold of another one on your private keys. But underneath form, from an asset management perspective, there's still an option. I think it would be a little bit bullish to say that every asset we will own in the future in the future, like in the short to medium term, will be represented in our factory wallets. It works quite so way away from that happening, but it's going to be a combination of goods. But I agree like it is interesting to see people in digital assets and not owning their private keys and just centralized entities basically becoming more meaningful players and then later on on the gap they will fit.

Arthur Lee: 48:02

Great, I'm going to end with one last question and, ruth, you can start first. So if you were going to look or predict, you know, the next 12 months, something, two things, exciting things that are going to happen in a web-free space, what would they be? What do you foresee?

Ruth Galvin: 48:16

Good question. I feel like, with predictions, if I had a crystal ball, I would definitely be a multi-millennia, I mean. I think, yeah, looking at how we're starting 2024, I think there are some positive signs of what's to come. What will remain constant, I hope, is, you know, more builders coming into this space and, with a lot of the positive signals that we're seeing a really good time to be building and hopefully, you know, a good time to also be the kind of fundraising off the back of that, I feel like teams have had a time to really kind of solidify the traction, prove some of those aspects around the business model. So, yeah, I hope to see more of the success and the fundraising side going into 2024.

Ruth Galvin: 49:08

And number two is tricky. I think maybe, looking at some of the narratives I mean definitely like narratives and within WebSeries really drives quite a lot of the market. So the narratives, like we've talked about today real-world assets, ai, deep-in I think those will probably continue and actually really excited to see some of the projects that come out of this space and hopefully joining the AppOpLager program. So, yeah, very keen to see what comes over this year, for sure.

Jasper De Maere: 49:44

I think we're at the early innings of a cycle which will be marked by institutional options stepping in, enlarged, driven by RWAs, also important, by the intersection of AI and blockchain, because if you look at the revenue numbers of Nvidia which came out yesterday, the demand for the product is just crazy.

Jasper De Maere: 50:08

Early implementation there, and I think ultimately, again, they will also come to the realization that they need to solve some of these issues in order to compile the transactions, though, and might look at blockchain, which is more natural solution for regulation. So I think we go into a cycle which will be a big one, arguably less volatile than previous cycles, because I think over the next five to ten years, we go from 10 to 90% adoption. This is as curve. I think we're about to get off the infrastructures, which were enough. There's enough mind share, so I'm very excited about this thing. So any builder that's looking to enter the space, I think knowledge is a very opportune time. That's also why we're doing a lot of these dedicated camps, because a lot of these narratives are becoming to the point where we can really provide very tailored solutions to these specific cohorts. So institutional adoption, I think, is the main driver behind the next couple of years.

Arthur Lee: 51:09

Yeah, I was just talking about my brother the last night and I was one who got him to buy into some Bitcoin. He actually got into grayscale a couple years ago, I believe. But then I just told him, hey, I think you should accumulate more, and I was telling the reason why. And I said look, institutions are in now. A lot of the RAs in the US have not even begun selling to retail clients because they're still learning how to sell it or they're still getting it approved within the organization. And that's only the US in out here, based out of Hong Kong.

Arthur Lee: 51:40

There's all this talk okay, who's going to launch a Bitcoin ETF out here? Then you look at all the markets and imagine how much money will come in beyond the one trillion market cap of today and what that is going to look like. You know after some time and, like you said, like with Nvidia, they're gearing up for what's to come. But everyone needs to realize it actually takes time. It is going to be much longer than most people anticipate and, like you said, it's less volatility. But instead of all the speculators in the beginning, I think a lot of them are now out and now it's more solid players, Like they're the ones that are really becoming mainstream, maybe waiting on sidelines or they're the new users coming in, but all those early adopters, speculators I kind of think they're not really moving the market anymore. It's now everyone else who will be coming in.

Jasper De Maere: 52:32

And overall a more healthy environment, though, would say, for founders, right? Not having to like stay up all night looking at, like, what markets are going to move and just know that in 12 months from now the space will look like even remotely the same as that they could be one for founders.

Arthur Lee: 52:48

Yeah, I think. I think that's an interesting thing that would you just said to is that, of course, many of the speculators are looking on different exchanges or what's happening in the market 24 seven, which is very difficult, but the ones that ever since the Bitcoin ETF came out, those only happen during like operating hours around the different jurisdictions. So when you look at the weekend and they're like, hey, why is Bitcoin activity so low, so slow? It's because you know, obviously where's the flow coming from. Actually, the markets aren't open for to to to those investors. So actually it's quite interesting big shift. Now that you don't, the big movements will happen in the normal market hours, which is actually quite interesting. It's kind of like the reverse now.

Arthur Lee: 53:34

Yeah, well, I want to thank both of you, ruth and Jasper, for joining the start of the podcast and providing your insights and, yeah, I'll definitely put your contact information in my video descriptions. Both of you are part of. I guess you've got an AI crypto download, ruth, saw that you posted. And then, jasper, you've got your research for the RWA post as well. But thank you again for for joining the show.

Ruth Galvin: 54:00

Thanks, thanks for being a pleasure to be here.

Arthur Lee: 54:02

Hey, so that concludes this episode of the Start of Voyage podcast. I would like to thank all of you for listening to this episode, and I'd really appreciate it if you leave any type of comments that you'd like to share, because it helps to feedback on how I deliver these podcasts.