 Hello everyone, thanks for sticking with us. My name is Arjun Kapoor and I'm pleased to be joined by Shriram Krishnan, general partner at A16Z. Shriram, great to catch up with you today. It's been a very busy time for you, A16Z. First office outside of the US has been open in London. A lot of what you're focusing on is Web 3. It is crypto, it's blockchain. Just lay out your thesis for us around these technologies. What's getting you excited? First of all, thank you so much for being here. Question for the audience, how many of you work in Web 3 crypto in any capacity? Sure, fans. Great. A bunch of you. Now, I just want to know, right before we came out, Arjun promised everyone here this is going to be 25 minutes of bangers and spicy content. Absolutely. So thank you. So I think the core of this is this, which is we think the internet had several errors. In the 90s, which I'm old enough to remember, you basically used developed internet, you read a bunch of content. That's all you could do. In the 2000s, you had user-generated content with sites like Facebook and Flickr and YouTube, where you could now write to the internet. And I think we believe this new era is about how do you actually own what you produce on the internet in many different ways? And we think blockchain technology is at the heart of making this happen. Now, obviously, a lot to unpack over there, but that is our thesis in a nutshell. Now, Sridhar, I've been covering this sector for a while. Just give us a sense of where we are in this path. Because even three, four years ago, everyone was telling me blockchain is going to revolutionize the world. It's going to change industry. It's going to hit everything. Much like the discussion around AI is right now. That hasn't really happened. So where are we on this journey? So my firm has been involved in crypto for a very, very long time. Chris Dixon, who basically runs the crypto fund, led our firm's investment in Coinbase almost a decade ago. So we've been doing this for a while. And when you do this for a while, you start to notice some patterns. And maybe the most key pattern that we notice is that this industry tends to be cyclical, where you have these waves of prices go up. And this brings a lot of application developers. It brings in usage. The prices go down. There are crypto winters, and people, the tourists leave the market, people with infrastructure, and then it repeats all over again. And we believe we are seeing a version of a crypto winter. So, and the way I would like to think about is kind of the few spaces. First of all, if you just look at the headlines, this has been a year of some negative headlines in the space. And I think if you look at, say, what happened with Binance and FTX, I think the way I think about it is, one, it's finally we have basically the rule of law prevail after a period of time. Two, we've been long-term partners of people like Coinbase, which has always been so focused on being the most compliant organization out there, really dotting the I's, crossing the T's. And also it shows that a world where founders know how to, what the rules of the road are in regulations is really the way to go. Now, that's in sort of the press headlines and the piece. And also, obviously, we really really happy at the heart of it, you want to make sure consumer funds are protected. But on the technology side, one of the interesting patterns that I see, and I suspect the people who are builders here maybe notice this, is these down markets are actually the best time to build. Because there's a lot less noise. There is a lot less things happening around you. So what if you look at some of the past down markets and down cycles, you see some of the most key piece of infrastructure come out of that. And we're actually starting to, you know, we see people, a lot of interesting infrastructure. I'm sure some people here are doing that. So, and our belief is this is going to lead to fantastic applications being built. And in terms of, you know, that's what everyone tells me. This is the best time to build. And in particular, you mentioned FTX, Binance as well. A lot of people are saying, well, this is it. We've drawn a line under the bad actors. We think, you know, they're gone now. Is that true? Has the industry learned its lesson? Do you think the majority of the bad actors have been swept out? Well, I think the two biggest question marks of the last year have been these two. And I think they've been dealt with. And you sort of saw, you know, the legal process play out. I think the core here is you need rules of the road on regulation, right? And I think we're sort of on a path to get there. And yeah, I actually think, like, you know, these are kind of like two overhanging questions, which, you know, I'm actually happy that it's kind of the end of the year. So we kind of start off 2024 with a clean state and we're excited about that. And regulation, big topic, of course, in the industry. There have been those I've spoken to. You mentioned Coinbase, Brian Armstrong over there who's told me, well, look, the U.S. is getting it all wrong. The SEC litigating against firms, being too aggressive. This is going to put the U.S. industry behind so far. There's others who say, well, look, you look at other places in the world. You look at what's happening in the UAE. You look at what's happening in Singapore, perhaps in the U.K. as well. These are forward-thinking regulators. So when it comes to regulation, what do you think is the best path forward? Do you think the U.S. is getting it wrong here? Well, I think the first question to answer is wide-regulate, right? And I think for us, we deal with builders and founders. These are usually small teams. They are technologists. They are not used to, you know, dealing with, you know, lawyers and regulations and politics. They're not used to any of that. What they really want to do is spend time building fantastic technology and fantastic applications. But to do that, you need to know what the rules of the road are, right? And these rules are important. You want to make sure consumers are protected. You want to make sure, like, the bad actors, some of the bad actors that we've seen in the last couple of years are not enabled. You need those rules, but you need clarity in those rules. And, you know, I think that's a place where the U.S. has not done the best job, where I think a lot of the regulation enforced, it has been more regulation by enforcement than being prescriptive. And this is also, you know, one of the reasons why we've been excited by it's very, very early stages, by the environment in the U.K. and some other places. But at the heart of it, you know, if you kind of remember nothing else, we are really about how do we get builders to just focus on building amazing technology and giving them the exact rules of the road and with clarity on how to do that. Okay. So just with that in mind, I mean, why now for the U.K. expansion? So first, as a firm, we have been involved in the U.K. for a very, very long time. We have invested in multiple companies over there. We invested in companies like TransferWise and there are several others. And that means that we've got a chance to study the U.K. over the long period of time. And we now know a few things. But how many people here are from the U.K.? Okay, several. Okay, awesome, right? Like, make sure you all contact me afterwards. I want to hear from all of you. So, well, I think what hopefully the folks here, you know, are examples of is the U.K. has fantastic academic institutions, fantastic talent, and we've been fortunate to partner with a lot of them as founders, as people who kind of work in the companies that we work with. So we know that. You know, second is we find that the U.K. is a place that is very livable. A lot of people want to come live there, build businesses. We also knew that. And I think the third piece is we think there is an opportunity with Web 3 where the U.K. has kind of shown some very, very positive steps to actually have this regularity clarity. So if you get that, what happens is with the first two pieces, I think the U.K. has a real opportunity to build amazing companies and to really plant the flag for innovation as a startup hub. So all of these came together. So it's why we, a couple of months ago, we announced, actually four months ago, we announced that we're opening our very first office outside of the United States in London, which I'm heading up. And not only that, we announced a few other things. The first is we are announced that we are going to run our crypto startup school program. This is our incubator where we put out a call for applications. We did this in Santa Monica earlier this year. We're doing it in London next year. We get thousands and thousands of applications. We pick a couple of dozen of the best ones. We give them a few hundred K each. And then for a couple of months, they come in, they get mentorship, resources, and, you know, really kind of like things which is really hard to get. So we're doing that in London, which is kind of a sign of our testament, kind of like a sign of like our confidence in the UK. Outside of that, we've been lucky, kind of like unknowns over the last year. We've made investments in a couple of UK-based companies as well. So yeah, we're very, very, very bullish on the UK. And now I'm in the one of London's newest residents. I want to ask you more about how you view UK startups, their innovation, etc. But first, I want to have to get your response to this. And there was an article written in the FT by Sineado Sullivan, a former senior researcher at Harvard Business School's Institute for Strategy and Competence. I don't know if you saw this, but the headline was about your expansion to the UK. And it was a question, is this a marriage of crypto-venience? Sineado argued, right? She argued that you've got $7 billion fund or more than $7 billion fund raised during a lot of it during a low interest rate environment where things were going good. Then you had the downturn. The US is now getting tougher on crypto. So, you know, this diversification was almost forced. You've come back to, you know, one of the only non-regulated place of crypto, i.e., the UK. How do you respond to that? Is that fair? I think one of the things people often don't understand about what we do is that we are in the long-term relationship business. So, if you look at something like, say, Coinbase, we have a 10-year history, right? Roughly a decade. And that's not the crypto with all of our firm. So, when we do something like this, this is meant to be a long-term relationship. The companies that, you know, we wind up partnering with, looking at, grabbing a coffee with, this might be yours in the making. So, I think sometimes when I, you know, when I read pieces like that, I think they fundamentally misunderstand what we do. We are not traders. We're not looking at prices going up and down. We are technologists trying to partner with companies that may often take four, five, six, seven, eight years to become something. So, this is for us a long-term sort of commitment to the UK. And look, it's very, very early days. Lots of things would happen. But, you know, as sort of, we're just talking backstage, one of London's newest residents, I've been enjoying meeting the fantastic startup community over there. Probably some people, folks over here, too. And how do you find the startups there out of London in terms of their level of innovation versus, say, you know, what you are seeing in the US and other parts of Europe as well? Well, I think one of the things about venture capital is, you know, ultimately, in some ways, you offer a commodity product, like you have capital. And so what do you need is to draw talent. Like, without talent, you really can't do anything, right? Like, I'm not building products. I'm not building companies. It is the founders that we partner with the building companies. And I've been so heartened by the founders I've met here, you know, and we've been meeting everybody early because you casually just meet people working on Web3, working on AR, working all these other spaces. And the best part for me has been, everyone has been so welcoming and warm. You know, to me personally, to my family, to the firm, they just, they've been very helpful and supportive. And the local startup community is really supportive. And you know, I think, you know, it's a long-term thing. Like, you know, I think they hopefully sense that we are in this for a long term for many, many, many years. And yeah, it's been very, very, it's only been a few months, but you know, I've been very excited. Yeah, there's probably a few people in the audience who put their hands up at the start, founders, people in these crypto companies wondering, well, what kind of companies are you funding? What's the profile? You know, we're in an environment, you mentioned it, crypto winter, maybe a crypto spring now, but are you being more discerning? Are you looking for companies that have a bit more profitability? Are you looking for companies that are being a little bit more careful in the way they're spending? Give us a profile of the type of, and is it certain parts of the stack when it comes to blockchain and Web3 you're looking at? Well, I think our approach in the UK is going to be probably our approach where what it is everywhere else, which is we are a very broad multi-stage capital firm. We are essentially technologists. You know, what we really look at is what is the technology underpinning one of these? But once you get that question, we go up and down the stack. Like, we have investments starting with layer ones to layer twos to when you go up to the app layer, we look at everything from gaming to decentralized media to I'm a big fan of decentralized social media. So we look at it all. But I think the core of what we do is technology. So if you're building interesting technology, I want to talk to you. That's interesting. Decentralized social media. Someone remarked to me earlier, they were from the crypto industry saying, you know, I'm not really at this kind of conference. It's very Web2. Web3, the promise is that we get decentralized social media. I've heard theories that actually what happens in Web3 because of this decentralization is the power that the Facebooks and the Googles of the world hold begins to be disintegrated. Is that a view you hold or is there more to it? Is there a bit more nuance? Look, I spent the majority of the last decade personally working in some of these companies and so I respect a lot of what they've done. But the truth is the internet is really sort of controlled by a few large social media platforms and a lot of us as users don't have a lot of say. For example, how many of you use Instagram? Pretty much everybody. Now, if someday if Instagram decides to delete your account, you probably have no recourse against it. About six, seven months ago, we had the TikTok CEO testify about the usage of algorithms. But is there a way to look inside the box? Is there a way to build an alternative client to TikTok or Instagram or YouTube? I'm not picking on anyone here, true for every one of these players. You can't build an alternative. You can't appear inside the box. When it comes to decently social media, it really is throwback to an earlier era of the internet. In the 90s, when I grew up, I used to write code which built my own email client and which could talk to any email provider I wanted to. You can't do that with Facebook, Instagram, Snapchat, TikTok, any one of these. And decently social gives you a right of alternatives, which is you can build your own client. It gives you a right to exit, which is if you don't like what they're saying, you can go choose your own. I'll give you an example. And this is obviously, I'm very biased, but one of the companies I work with is a company called Forecaster, which we're investors in, is a decently social network. Now, I highly encourage everyone here to go check it out, download it, use it. But one of the things you will find is that there is absolutely nothing the forecaster team can do to take away your account, right? And there's nothing they can do to stop you from building an alternative. That is not true with any of the other platforms that I just mentioned. And that is real power in that. What it brings is any developer here today can build an alternative experience without needing an API key, without needing to talk to a VP of BD or partnerships, and it really just explodes innovation. Imagine if somebody had to build email in the 90s and you get an API key and there was throttle limit, throttle. We wouldn't have had a lot of the technology we take for, I don't know. And I think, and I use Spark as an example, but I think a lot of Web 3 is about bringing back that promise of permissionless innovation, right? We promise fireworks. We promise some spice in this session. We've got 10 minutes left. Oh, dear. So we've got Twitter, OpenAI, Bitcoin, and you're meeting with the king left in 10 minutes. I'm suddenly having technical difficulties here again. So because you're talking about social media, let's get to the current landscape of social media, X, or formerly known as Twitter, under Elon Musk. Last night, he went on an expletive ridden tirade telling advertisers to effectively go to F themselves was his words. What's happening with Elon Musk? What's happening with X? What do you make of his running of the company? I've done a few of these where somebody always asks me what does Elon Musk mean? And my standard response is if you want to know what Elon means, there's one guy, he's at Elon Musk on ask, you should go ask him, right? Because he speaks for himself. Here's what I'll broadly say. We're obviously super fortunate, thrilled as a firm to work with him. And I was personally involved with Elon as well. He brings up about change. And if you look at the last year of X, look at community notes, look at the fact that you can now upload videos full-time. Look at the fact that when these massive world events happen, sometimes they are fun. Last couple of months, they have been very serious hefty world events. X is maybe one of the best places to go consume content on it. Like, how much time do you spend on X every day? Less now. It's becoming difficult to use at times. And what else do you spend more time on? Well, started dabbling with some of the other things, right? Threads and Instagram, whatever else is out there. Well, when I ask people this question, what I find is that when something important happens, like open AI or something, they always come back to X because that's where the action is. And look, Elon is a person who's built multiple world-changing companies. This is early innings and he's not shy. He's not boring. And I'll leave it at that. Look, at the end of the day, as a business, it's an ad business at the end of the day still as much as he wants to turn it into the everything app, etc. It's an ad business, advertisers have run away. The valuation he paid for is halved. Revenues are getting difficult at the moment. From a business perspective, this doesn't look like good business. Yesterday's tirade felt like a person under pressure. Well, I think, look, these are, again, and you should probably ask Elon or Linda these. I will say one of the things, when I was at Twitter, one of the things we struggled with was we used to have this sort of joke in there that with Twitter, you can influence world governments, but sometimes you can't sell ads. In the sense that the value of Twitter wasn't really captured by the business model. And one of the things I've loved about what Elon has done is diversified the products that Twitter now has. You now have subscriptions where I don't have a subscription where people, you know, it's like a dollar a month, so it's meant to be sort of the lowest price point where others are making money from it, where people can actually subscribe to what I have. And I see a lot of podcasters now use X full-time to be like, I'm now going to have a legitimate business, right? And you're now seeing all these other things that he's building on top. For example, I just started to play with Grok the other day, which is obviously built on top of X as well. So what I think I like about Elon is he stands, and look, if you listen to him, he says anything, he stands for rapid change. He's going to make a bunch of changes. Some of them will work. Some of them won't work. Some of them people here will like. Some of them you won't like, but there's always going to be change, right? And I think that's how that's been at the key of how I've seen succeed at Tesla, at space, other companies. And yeah, so we'll see. But you know, I'm still on X as much, if not more than I was last year. Okay, let's get back to the crypto markets and I want your macro view going into sort of next year as well. What part of the cycle? We know, you know, the crypto markets come and go in cycles. What part of the cycle are we at at the moment? We've got, you know, the FTX and Binance issues drawn a line under, you've got people excited about potentially less aggressive central banks next year, the halving for Bitcoin next year, maybe an ETF. Where are we in the latest cycle, would you say? Well, the first thing I'll say is like, I don't have a crystal ball and I can't make predictions. And these things are very, very hard to predict with any accuracy. But what we can do is look at how these patterns have played out previously and see what lessons are there from us. So one, as you said, you know, sort of the two big sort of shoes that were overhanging crypto, which was FTX and Binance, it feels like they've been resolved in some capacity. And obviously there's going to be like a process that plays out these, but you know, there's a liberal underlining that has happened underneath them. For me, as a technologist, I look at technology, right? Like if you look at, for example, what happened at NFTs in the last cycle, that is because people built the standard of ERC 271 and that enabled all this amazing innovation, which wound up happening. So I look at all the things that people are doing to make crypto faster, cheaper, easier to use. Like for example, just use one example, account obstruction, which for those of you in crypto, you might have been following, like that's super exciting because that means you now have projects which can say, hey, I will pay for users gas fees when they use this. And I would make the word experience a lot easier in ways that wasn't possible before. So I'm a consumer app person. I think crypto's adoption lies in things which are easy, fast, cheap to use. And for me, I'm seeing a lot of these infrastructure being built out, which hopefully you then see amazing consumer applications that you can download on your phone and use. So I think we've been seeing some very good infrastructure being built out. So you're sort of less interested in the price at the moment of these crypto? I think prices come and go and obviously they play a part in people's psychology, but the technology is what motivates me and it's that technology is why I'm in the space. But as you look at the space, you know, when things are going well, funding's easier and people are very excited about when you look at sort of some of the developments next year and particularly this ETF, does that change the game at all for where you're investing or not? Not for us because again, you know, we are not traders. We are long-term technologist investors. So we partner two people, they have some piece of code, we help them build and maybe yours on the road that becomes a fantastic piece of infrastructure. So when you have the view, you have to really nicely take the long-term view as opposed to react to what is happening in the moment. So I don't think that really influences that. Every meeting we have with the founder is very similar. We're like, who is this person? What have they built in the past? What have they been able to do? What is the technology? What is the use case? That's what we've always been focused on. We're still going to be focused on. Great. Shriram, we've got about three minutes or so left. So we'll just bring this discussion to a close with a couple of other very interesting topics. Open AI. This is the gossip section of the chat. What do you think happened there with Sam, all of them, and the whole board? I know no more or no less than any of you folks. Like everyone, I was on X watching. By the way, did your usage of X go up during that week? Yeah. I mean, there's been so much happen when we're using it. Yeah. Yeah. I just like to point out that all the principle players were tweeting or exposing all the time. So even some people who said they don't like Elon had to come back and get back on X. So I'll just leave it there. But I will say, look, I don't know anything more than anybody here. I do think it's sort of a good... One of the things I'm a big fan of is decentralization and open source. Without open source decentralization, I wouldn't have had my career. I wouldn't have been the skin in India who could build things. I think more options, more open source is good. And I think what this shows is that you need more alternatives, right? You need more open source alternatives where if you disagree with the governance, maybe you can download from GitHub and go make it your own. So look, I don't know anything more than what has been said on X. But I do think this kind of leads people to understand why open source decentralization is important, not just in AI, but probably for like every space. That's fascinating, because earlier this year there was a leaked memo from a Google researcher who basically said, look, Google, open AI, we have no moat because... Or almost no moat because at the end of the day, open source is a real challenger, potentially, to what we're doing with large language models and these foundational models as well. That's a big debate playing out here in Europe as well. Do you think right now a lot of the US tech companies are getting the sort of big limelight around AI technology? Do you think Europe has a shot? Absolutely. And by the way, I have a lot of tweets on this topic if folks are interested. I think, look, if I was in sort of a European regulator or a UK-based regulator, I look at like, what do we have? We have amazing founders, amazing talent, a lot of people in AI, and I would say what helps them. And I think open source fundamentally helps them because all the large AI companies happen to be in the US. So what I would do is one, I'm very bullish on all the AI talent that I'm seeing. I don't spend much time on AI. I have other partners who do. I spend all my time crypto, but the people I've seen or heard of I think are fantastic. And if I were in Europe or the UK, I would be doing as much as I can to really sort of encourage more open source AI and make sure there's not regulatory capture where a few large companies can dominate how we all use AI. Shriram, in your short time in the UK, you've already met Royalty just in the last week or so. You met His Majesty King Charles in the UK. What's his view on Bitcoin? Well, you'd be surprised to hear it's zero, zero is proof. No, I'm kidding. It was a real honor to meet His Majesty. It was part of an event where several of us who are investors in the UK got to talk about our sort of outlook on what we see and why we're bullish on the UK in general. And look, it was a life highlight. He was so kind and generous to ask about my family. He was very thrilled that we are here in the UK, but it's a pure life highlight. But I'll say this, and maybe the Indians in the audience can understand this. Nothing has made me more popular in my in-laws WhatsApp group. Because my in-laws do not know venture capital. They do not know crypto or Web 3, but the king, they understand. And it was a true highlight, a true honor, and it was absolutely everything I could have hoped for. Well, Shriram, it's been an honor to sit with you and speak this past 25 minutes. Thank you for your insights, taking all the questions from OpenAI to Elon Musk to crypto and what's beyond a round of applause for our wonderful speaker, Shriram Krishnan from A16Z. See you back on next.