Welcome back, this week Anita and Lucas interviewed Li Jin, cofounder of crypto venture firm Variant, which just raised $450 million for its third fund. Jin, formerly a solo GP at Atelier Ventures, is known for developing an investment thesis around the “passion economy” that eventually led her down the rabbit hole of web3. A backer of companies such as Magic Eden and Mirror, Jin talked about the ethics behind onboarding cash-strapped creators into crypto, why she’s no longer a solo investor and how she balances new investments and supporting her existing portfolio companies through a downturn. Subscribe to the Chain Reaction newsletter to dive deeper: https://techcrunch.com/newsletters
Welcome back, this week Anita and Lucas interviewed Li Jin, cofounder of crypto venture firm Variant, which just raised $450 million for its third fund. Jin, formerly a solo GP at Atelier Ventures, is known for developing an investment thesis around the “passion economy” that eventually led her down the rabbit hole of web3. A backer of companies such as Magic Eden and Mirror, Jin talked about the ethics behind onboarding cash-strapped creators into crypto, why she’s no longer a solo investor and how she balances new investments and supporting her existing portfolio companies through a downturn.
Subscribe to the Chain Reaction newsletter to dive deeper: https://techcrunch.com/newsletters
Helpful links:
https://techcrunch.com/2021/10/19/variant-debuts-a-new-110m-fund-for-crypto-startups-announces-li-jin-has-joined-as-a-general-partner/
https://techcrunch.com/2022/06/30/khaby-lame-crypto-binance-christiano-ronaldo/
Anita Ramaswamy 0:03
Hey everyone, it's indeed on Lucas. Welcome to chain reaction where we unpack and explain the latest in crypto news drama and trends, breaking things down block by block for the crypto curious. Every Tuesday, we interview an expert in the web three space.
Lucas Matney 0:19
This week we talk to legion of variant,
Anita Ramaswamy 0:22
Jen has been investing in the crater economy for a while now she started her career as a consumer VC Andreessen Horowitz, and she's now a general partner at variant Fund, which is a crypto native venture firm that recently announced their raise of $450 million. And some of her investments include uniswap, mirror yields, guild games, and substack. So a lot of familiar names there, we really
Lucas Matney 0:43
wanted to chat with Jin, because she's pretty well known in venture circles for some of her writings on the content creator economy, and this crypto downturn has kind of complicated some of the promise of artists using web three to build sustainable streams of income. So it's clear, there's some wrinkles on this. So we want to get into some of that. Yes. So
Anita Ramaswamy 0:59
let's get right into it.
Lucas Matney 1:05
Well, we are very excited to have Lee with us today. Thanks for being here.
Li Jin 1:08
Thanks so much for having me. It's great to be here.
Lucas Matney 1:10
So it's obviously been like a turbulent few months or whatever. But the space has been pretty exciting for the past couple years, and you've really dug into it. I know that one of your specialties has been the greater economy. So I'm kind of curious if you could just break things down right off the bat in terms of like what distinguishes a web three content creator from someone who's mainly sticking to web two platforms?
Li Jin 1:30
So I think there's a lot of ways I could answer that. Yeah, yeah. Well, it's definitely true that part of the reason why I got into web three in the first place as an investor is from observing and studying the crater economy really closely and very strongly feeling like web three was the model or the direction that we were headed in with regards to the crater economy that could offer more greater empowerment and greater enfranchisement in terms of what actually distinguishes a web three creator versus web two, I tend to not draw the distinction in that way. Instead, I think of creators as being really heterogeneous, there's lots of different types of them. I think there's no one single like monolithic identity of a creator, but rather, a commonality amongst the entire creator economy is that creators are picking and choosing tools to add to their toolkit to best suit their needs. So they're choosing a variety of different monetization models or different platforms to use. There's different parts of their workflow from audience building to engagement to monetization, and different software platforms might slot in at different stages of that workflow. And so I think of web three is really today tackling like that last stage of the workflow, which is monetization. And it's typically coupled with lots of web two platforms that serve the top of the funnel, which is audience building. And so creators are exploring, you know, how do I funnel my audience to greater and greater engagement with me and increase their affinity with me and ultimately make a living off of creating this content. And web three offers an entirely new type of business model that's predicated on digital scarcity. But oftentimes that supplements, other types of business models that they're also leveraging, potentially from web to. So I think of it less of a, there's a web to creator versus Web3 versus people are mixing and matching the tools that work for them,
Lucas Matney 3:10
I guess. And maybe this is a little bit of a nebulous question. But when I think of like a web to creator, like if I think of someone starting a new YouTube channel, their audiences slowly getting to know them. And I'm sure that same case with web three, but maybe in web two, the like viewer is ending up thinking more about the next video versus with web three, it's kind of more of a long time horizon that they're thinking about, like, Okay, well, what's my relationship with this creator gonna look like in a year and a half? Like, am I investing in the future success of this creator versus the quality of the next video? So that kind of changes how maybe totally that early relationship is built?
Li Jin 3:42
Yeah, I think that's definitely a great observation. I'm actually writing a post about this right now, still under under construction, but really, the idea of this is the new Creator Playbook in web three, and how that differs substantially versus the old Creator Playbook. And web two, which, as you mentioned, involved putting out a lot of content. Oftentimes, creators would invest, you know, months or years of their time into building up an audience through free content before switching on monetization, or being able to even turn on monetization through some of the platforms. And so the model was, like, you know, get as large of an audience as possible put out a ton of content that hopefully attracts lots of people before hoping to monetize that one day. And so it was a multi year process to become a creator in web two. Whereas in web three, I think a new playbook that is being written right now is how can create or use tokens to bootstrap that initial monetization and initial audience even in advance of creating content. So the ordering is sort of flipped, where we're seeing all of these creators launch a token, whether that's a non fungible, like NFT collection or a social token that token instantiation actually draws fans or audiences to them potentially for speculative reasons as well. I think the user psychology also differs substantially and then they take that pool of funding as well as an audience that has been bootstrapped, which now has skin in the game in their success, and then uses that to create content that now has an inbuilt audience who is interested in it and wants to see it succeed. So I think that is like a major difference that is nearly emerging. Yeah, that's interesting.
Anita Ramaswamy 5:15
So I guess jumping off of what you said there. I'm curious about you started talking a little bit about this. But what makes web three uniquely suited as a monetization tool? I mean, we have like platforms like Patreon and things like that, like other ways that creators can fundraise and essentially monetize their work. So why is it that web three is such a special tool and creates that kind of opportunity that you wouldn't otherwise get as a creator? Yeah,
Li Jin 5:36
I think there's two primary reasons that I'll point to today. And then two more that are more sure that we're looking and have yet to be fully realized. And this is also outlined in a post that I put out last December called the web three, Renaissance, cool, all about how web three can lead to this kind of content creator Renaissance bio. Yes, Lincoln subscribe. And the reasons why web three represents such an unlock for the crater economy in terms of monetization is really predicated on two things today. One is the idea of digital scarcity. And then the second is combining patronage with profit, or what my colleague Jesse calls patronage plus patronage with the possibility of profit. So unpacking those two things a little bit, the first point about digital scarcity. So previously, previous to web three and blockchains, you really didn't have the ability to track the provenance or the ownership history or to even know like that a single media asset was scarce, every media asset prior to blockchains was infinitely copyable, there was no way to see if this was the original instantiation. That wasn't even concept. And so the consumer benefit was there in the sense that they could access all this free content that really lacked a business model. And the consumer surplus was tremendous. But the flip side of that is that creators were often relegated to using advertising as a means to monetize their content, or pods and monetize their content more obliquely, rather than being able to sell it directly. Because obviously, a key tenant of like being able to create value around something is that it's scarce, like there's a limited quantity of it. That's how we ascribe value to things. And so the introduction of digital scarcity is actually really meaningfully different for creators because it allows them to say that this single media asset, or this single type of file, or token is scarce, that there's only X number of them in the wild, they've been legitimized and created by the Creator. It is like canonical, you know, instantiation of this asset. And then audiences actually ascribe value to that, obviously, there's a lot of talk about whether they should or not, with the whole right click and save stuff, but it's just the audience's will do it, they will. Exactly. It's just a fact that humans value what is scarce and want to feel close to someone by owning something that is scarce, and that was created by them. And so this has helped creators monetize to already the range of like billions of dollars per year through NFT sales. This a16z report put the number at $3.9 billion was earned by creators last year through NF t's on Aetherium. And so this idea of digital scarcity has been really a tremendous value proposition for creators being able to capture value from their work itself. And then the second piece of why web three is important is this idea of patronage plus, so it shifts the value proposition on the consumer side from merely consuming something and supporting it out of altruism or supporting it for some other type of utility and value that you're deriving from it, to also adding a profit incentive to supporting a creator. And that also ties back to the digital scarcity point, by owning something that is scarce, you could potentially resell it later on for a higher price. And so this newly added fan benefit of the possibility of profit, I think, has turbocharged the monetization capabilities of creators where fans could potentially actually earn a profit off of purchasing their work or investing in a creator. And then down the line, looking more towards the future of what web three could represent for creators. I think one hypothetical use case that has been written about a lot by people who watch the space is the potential to create like a Universal Media Library, maybe through NF T's that would then have baked in revenue flows and monetization models such that anytime at work gets referenced, there's some sort of royalty scheme that then flows back to your original creators, because the idea is that all creativity is kind of iterative and builds on what was created before. Yet that economic flow system hasn't been built out and could potentially be built out if we have this universal sort of catalog or library of all works that have been created. And then lastly, is the idea of shared ownership of products and communities. Creators obviously have been responsible for creating a lot of the equity value for technology companies over the last decade plus and yet have captured very little of that equity value. Simply be Because of, well, a lot of different limitations and reasons for that. But one of the promises of web three is the ability to distribute ownership through tokens. And we've seen a number of, for instance, like NFT marketplaces, or different protocols share ownership with their users in the form of tokens and drive value to that token,
Lucas Matney 10:18
I'm curious. And I kind of want to circle back around something you said earlier, it was talking about how web two creators, they may put a lot of free content out there before they ever have really hopes of monetizing the stuff they're creating. And that sounds pretty similar to how the web two platforms exist in terms of they're trying to build an audience as well. They don't want to poison the well in terms of monetizing too quickly. But I guess like with web three stuff, some of these things, it's not like they're operating on like a well tread paradigm, like some of this stuff is the platform's themselves are seeing if this works, too, in terms of monetizing first with the future promise. So I guess like one of the pieces of criticism I hear and I can kind of resonate with a bit is like in the web two world, it was the venture capitalist taking the risk on some of these platforms taking off in the first place. But here, it's kind of spread across the whole gamut. So you'd have the creators, you have people just working on Play to earn stuff, everyone's kind of in this grand experiment at the same time. So do you think that that's like, a good thing? Do you think it just that's like a sign of the excitement around it? Or should you know, have this move slower? I know, that's a dangerous question in VC circles to ask. But I'm curious.
Li Jin 11:25
Yeah, I think that's a great question. Something that I've said before is that web three enables everyone to be an investor. And I like there's lots of different versions of this, like, everyone becomes a VC or everyone should be an investor and the products and services that they're using, I think the flip side of that, as you're pointing out is like not everything that people are investing in is ultimately going to turn out to be valuable, right? Like, there's no promise that what you own is actually going to be worthwhile or something that helps you build wealth. Yeah. So even though web three makes it possible to expand access to ownership, it doesn't make the promise that that ownership is ultimately going to be valuable. And I think that the key diff between that versus web two is like in web two, you know, there was a special segment of people or institutions that could have access to ownership of private companies in the form of VCs or institutional or accredited investors. Now, a lot of these projects are launching tokens much earlier in their life cycles before startups would have IPO and presented access to retail investors. And that comes with both benefits, as well as drawbacks. The benefits are more possibility for investors to be a part of that growth way in advance of the web, too centralized counterpart would have been made available to them. But the flip side is like potentially getting involved in projects that are relatively riskier and don't ultimately retain their value. So I'm a believer really, in individual choice and freedom. A lot of my work is really guided by the notion of human freedom, and how do we expand freedom. So I'm not a fan of like, patronizing regulations that dictate who can and cannot invest in what types of assets and just sort of saying that this entire swath of the population shouldn't be able to invest at all and these types of assets. Instead, what I think we need more in this space is just broader education, education and disclosures about who is providing the education and what their interests are and what their exposure might be, such that users can make the best possible decisions for themselves.
Lucas Matney 13:28
Yeah, it's a fascinating issue. And I mean, like, I guess, when you talk about democratizing access to asset classes, it's only been within the past few years that people have been able to purchase stocks through apps. So I guess when you think about the idea that someone is a few clicks away from doing call options, or something that's a little bit more on the risky side and some of these apps as well, you kind of wonder if that's like, it's not like there's a perfect option, do we democratize stuff and kind of hold stuff back and an arbitrary timeline to like, educate people, but people talk about the education problem in web three, it's a very difficult problem to solve with anything but a little time, like, people have to lose money to understand certain things people have to like, go through all these experiences. And so they're people who've been in the space for five or 10 years in the crypto world who have like, learned, like, I gotta keep my stuff in a hardware wallet. I gotta like, I can't click any of these transactions. But it's difficult when like, everyday consumers have to learn everything the hard way sometimes.
Li Jin 14:22
Yeah, I agree, look like I think it's very sad to see some of the incidences that have occurred over the last few months. Like I find it personally, like just very heartbreaking. And I feel like there was like, not total transparency there with regards to how some of these products and applications worked or invested their capital. Ultimately, I don't think the solution is just to bar access from retail investors. I think it's more clarity of information disclosure, and more education, more widespread knowledge. And I hope that, you know, we can play some small part in that through all of the content that we publish, and I hope that investors I take their position in the industry very seriously and regard it as a responsibility to actually provide full transparency into how these products actually work.
Anita Ramaswamy 15:09
I think the point you made on education is a really fascinating one. And this is like an issue that I think about a lot, right? Because I totally agree with you about expanding access, and like the personal freedom aspect being super important. And then if you think about our status quo, like people can lose money in the public markets, too. Like we have disclosures, obviously, it's not the same as some of these projects getting like fully rug pulled or anything, but it does happen. Like we remember Enron and like all of that other stuff that that's gone down. But I guess when I'm thinking about that, a lot of people, including myself feel like okay, education is the answer. But I guess my question to you is like, Who do you think that responsibility falls on? And how can they be incentivized to educate properly because a lot of the investors they have like their own return goals, and they want to cash out and end up on top and the retail investors who are invested in the same project might not necessarily have access to that same information? So I guess how do we align incentives to make sure that people who are new to investing in web three or new to investing at all are actually getting the right education and the right tools that they need? Yeah, I
Lucas Matney 16:04
feel like a lot of people are learning about these projects from like, a Jake Paul, versus like, Yeah,
Anita Ramaswamy 16:09
I do learn a lot on tick tock, I'm not gonna lie.
Li Jin 16:11
Yeah, totally. I think the answer is like very multifaceted, and probably entails a very multi pronged approach. There's no like silver bullet to this. But sure, I think one of the issues that has plagued this last cycle is there was a lot of kind of like shilling of products masquerading as like education, or neutral information, when really it came from people who had financial exposures to these tokens, like in the web, two worlds, you know, there's lots of regulation of influencers and how they have to disclose how they've been compensated. And when they have financial interest in the thing that they're marketing that doesn't exist yet. And web three, I think it should, because when people read a piece of content that seemingly unpacks how a product works, they don't know like, is this person holding this token? Are they not? Like, are they early investors? Like, who knows? And so it's very difficult right now as a retail investor to decouple education from marketing.
Lucas Matney 17:05
Especially hard when with a lot of pseudo anonymous Twitter accounts. And you're just like, I don't even know who this person is. Yeah, maybe the FTC doesn't either. Yeah,
Anita Ramaswamy 17:14
yeah. So switching gears here a little bit. Ly, I know that you started out and you spent about two years as a solo GP, you know, running your own VC operation, and then you opted to raise this new fund with variant and I'm just curious, what led you down that path? And why did you sort of decide to pivot away from doing this on your own?
Li Jin 17:31
Yeah, so interestingly, variant started as all solo GPS, all three partners, myself, Jesse, and Spencer, the three GPS at variant all got our start investing, as fund managers as solo GPS. And we decided of our own volition to join forces. And I think it just really was for us a question of how can we make the biggest impact on technology development and as investors, and we really felt like the combination of all of our backgrounds and all of our expertise areas, it was a situation where the whole was greater than the sum of its parts, right? Where I have this like, very deep consumer background, having spent multiple years covering marketplace and social network investing at Andreessen, Jesse Walton was my colleague there, he's been building in the blockchain space since 2014, help set up the first a16z Crypto fund, and he covers infrastructure investing for us. And then Spencer neuen. Our third partner was also a builder in the Bitcoin space since 2014, and was one of the first defy investors really to use on chain analytics to assess the health of these different financial protocols. And so we all have these very, very diverse different backgrounds that we think helps bring something new to the table. And in combination really helps all the founders that we back to connect the dots across the full stack. I think also, like, I know, there's been like a solo GP kind of way of over the last couple of years. I think, being a solo GP, it's kind of like being a solo founder of a startup, like it gives you tremendous freedom only path. Yeah, yeah, there's lots of pros, but there's also lots of cons. It gives you tremendous freedom, you can basically, you know, do whatever you want, you can move really quickly. But ultimately, I think I like to go back to that thing. If you want to go fast, go alone, if you want to go far go together. I think that's really, really true in startups or in investing. And we decided that we wanted to go far. So we have to go together.
Lucas Matney 19:22
I think one of the interesting things talking about the weight of solar GPS, I saw so many get really intrigued by web three, and maybe they had a focus that was on enterprise SAS products are something that like future of work, but a lot of them kind of found their way to web three in one way or another. Do you think that that's just a product of the general excitement around the space? Or do you think that something about being a solo GP made this something you could deploy capital into tokens and do stuff like that, like those little bit more effective for the model?
Li Jin 19:48
I can't really speak for anyone but myself, but I think for me, being solo really aided in the acceleration of my learning process and becoming like Full Time web three, because I can move super quickly I can meet with all types of companies, whatever piques my interest, I could decide, you know, I'm going to spend all my time here. And that's what happened when I first raised Italie. A fun one, I didn't envision it as a web three fund, it was envisioned as a future of work consumer software fund. And it just so happened that from the outset, I started getting founder pitches being like I'm building a web three, but what you've written about the passion, economy and creator, monetization is exactly the vision that we're building towards. And so I started back in all of these different web three projects that I found really compelling that fit the ultimate vision of what I was trying to support, which is new types of work and expanding access to new types of income on the internet. So I backed projects like mirror, the web three, publishing platform, and crowdfunding platform Foundation, the NFT marketplace, and many others. And that was all because like I was able to respond so quickly to my intellectual interests, and just decide on a day by day basis where I wanted to spend my time. I think for a lot of other solo GPS, it was probably similar, where they could just let their interest lead them really quickly and responsively. Without the apparatus of a larger firm that kind of like dictates where people are going to spend their time.
Lucas Matney 21:11
Right. If you're an enterprise partner at some multistage firm, they're probably gonna be like, alright, well, let's leave the crypto to the
Li Jin 21:17
pool. Yeah, exactly. Yeah. Like, do we want to have a firm crypto strategy? And like, let's discuss that for six months, etc?
Anita Ramaswamy 21:24
Yeah, the funny enough, something I've heard a lot is like, what three is a space for people who are pretty much generalists and have a bunch of different interests. And I think that's kind of true. So it's interesting to hear that you've got the opportunity to do that. But I guess it would be remiss for us not to mention the markets right now. And obviously, we've seen a little bit of price recovery. But we're still I think, in a crypto winter, at least I'm gonna go out on a limb and say that, but I'm curious that like, as a VC, how do you sort of make the decision to balance between what you just did with variant like raising new funding to actually back new companies versus supporting your existing portfolio companies so that they have some runway to weather what's going on in the markets right now?
Li Jin 21:59
Well, firstly, I would call out the fact that with this latest fund that we just raised and announced last week, yeah, it's sort of bifurcated into two separate pools of capital, there's the Seed Fund, which is $150 million. And we'll continue our mandate of backing super early stage visionary founders who are building and in new markets enabled by web three there. And then there's a $300 million Opportunity Fund that we're going to be using to double down on portfolio projects that are showing demonstrated traction both within the portfolio and beyond. So we're kind of doing both, we're both supporting our existing portfolio companies. And we're also continuing our work in early stage investing. And as investors, I actually really think that this is an amazing time to be a web three investor, despite the markets, I think it's a moment of really being able to get a very clear signal from the market as to what actually has product market fit. So I think as a consumer investor these last couple of years, it's been incredibly noisy to parse out what actually has Product Market Fit versus what has a lot of hype and speculation around it.
Anita Ramaswamy 23:02
And I think as a as a Web3. Journalist, that's definitely been a challenge. Yeah,
Li Jin 23:06
exactly. And I actually think the best consumer builders in web three are going to see this as an amazing opportunity to get accurate feedback from the market, and be able to tell whether their product that they're building is actually solving a fundamental consumer need or not like the market today does not lie, either consumers are going to adopt your product because it is actually doing something valuable for them or they're not. And that's because a lot of the speculative noise has died down. So I actually think right now, the founders that we're seeing are as mission driven as ever, maybe even more so and super long term oriented and really treat what they're building right now as their life's work. So we're really excited to continue on in our investing work at the current moment, and we think it's an awesome time to be an early stage investor. And right now is really the perfect time to think through the fundamental questions of what is the job to be done that I'm trying to solve for on the part of consumers? What is the community that I'm trying to seed my project with? How do I iterate to product market fit? I think those answers can become more crisp now than ever before.
Lucas Matney 24:07
You know, one last thing and I'm curious, the crypto space, it's very young, and like the companies that are dinosaurs in the space are less than a decade old. So I've been really interested in looking at Coinbase the past few months, and like thinking about how much timing factors into all of this, because there have been like these rising exchanges over this bull cycle alone that have seemed to like catch fire and are now competing with it. When you're thinking about backing some of these companies. It seems like even amongst other spaces in venture, a lot of the success stories of bull runs are companies that were born in that bull run and there are some that kind of transcend it. But I'd say it's fair to say that it's a it's a very small number and it might even be a smaller number than companies in the web two space. So I guess how does that obviously you want to support your portfolio companies and keep your name in a good position, but also knowing that if a company didn't necessarily reach Product Market Fit it or didn't hit it in some capacity during the times that were really hot. It's a little bit of a different challenge.
Li Jin 25:06
Yeah, I think timing obviously is everything when it comes to startups, building them investing in them. But something that I'll point out about all of these different crypto cycles is that I think we often lose sight of the lineage between different cycles, and how connected they are. So what I mean by that is right now we're at a moment in which a lot of people are reflecting on the last bull market and seeing a lot of these projects as kind of like speculative bubbles or unsustainable phenomenon. Well, people also said that in 2018, looking back at the previous bull market, and dismissing a lot of the projects that had taken off at that time, and fizzled out as kind of unsustainable novelties, but what they lose sight of is the fact that in each of those instances, there was usually some nugget of insight or learning that then pave the way for the more sustainable version and the next cycle. Sure. So an example of this would be like crypto kitties, crypto kitties took off, it represented this huge percentage of all the transactions on Aetherium in 2017 2018, before ultimately kind of dying down that paved the way for NF T's. And Top Shot and all the collectible market and PFP is in this cycle. And so I think timing is really important. But with the benefit of time, I think founders are going to iterate on a lot of the learnings from previous market cycles, and continue to build towards the more sustainable versions of past projects.
Anita Ramaswamy 26:34
Well, Lee, thank you so much for joining us that we covered a lot of ground, a lot of different topics here. And we were super excited to have you on the podcast. So it was a great conversation and hope you have a great rest of your week and month and we'll see how things shake out in the industry.
Li Jin 26:47
Thank you guys so much for having me. This was really fun. Yeah, likewise, thanks.
Lucas Matney 26:55
We'll be back every week with interviews with the experts in the web three space catch Anita, Jackie and myself every Thursday for the latest in crypto news. You can keep up with us on Spotify, Apple Music or your favorite pod platform and subscribe to our companion newsletter also called chain reaction. Links to the newsletter and more from our guests can be found in our show notes and be sure to follow us on Twitter at chain underscore reaction. Chain Reaction is hosted by myself. Lucas Matney along with my co host and Anita Ramaswamy. We are produced by Yashad Kulkarni and our associate producer is Maggie Stamets with editing by Cal Keller Bryce Durbin is our Illustrator Alyssa stringer leads audience development and Henry pic of it manages TechCrunch his audio products thanks for listening