Mable Jiang
Sep 8 · 18 min read
Richard, Mable, and Max (from left to right), photo taken at Web 3 Summit

This interview series are conducted at Web 3 Summit 2019 by Mable Jiang, Partner at Nirvana Capital, on behalf of Blockbeats, a leading blockchain media company in China. Mable Jiang was invited as a panelist to speak at the Investor Panel on the Web 3 Summit. During the conference, she spoke with various leading investment firms in the industry and exchanged opinions on a few hotly discussed topics.

This article is Mable’s conversation with the Founding Partners at Fabric Ventures, Richard Muirhead and Max Mersch.

(To read this post in Chinese, please go to Blockbeats website.)

Fabric Ventures is a key builder and participant in blockchain industry and Web 3.0 ecosystem. In June 2019, Fabric Ventures hosted the Web 3.0 Track at the CogX Conference in London. They also published a widely read article about their Web 3.0 Investment Thesis at the year end of 2018. As more attention is directed to Web 3.0, we see their portfolio started to take off gradually.

In this interview, you will learn:

How was Fabric Ventures formed?

The Web 3.0 investment thesis of Fabric Ventures

How would the traditional Web 2.0 organizations join the Web 3.0 workforce

What was the evolution of DAO in human history and decentralized network?

How Fabric Ventures think of Cosmos and Polkadot?

— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —

Mable: Would you guys like to introduce a bit about Fabric? How you started, the investment thesis, etc.,

Richard: I am trying to think of where to pick up the thread — that was an unintentional pun (laugh).

At the beginning of 2017, half a dozen of us in an office in London where a bunch of us were part of Open Ocean and others were with Firestartr. We had a fund in Open Ocean where we thought that we could invest in data-driven startup, dev-driven startups, and decentralization, but that turned out to be a little too deep tech for the investment thesis of Open Ocean, and a little bit ultimately too token-driven for the investment mandate and the LPA for Open Ocean. Then, on the other hand, we had this Firestartr vehicle that was able to more arbitrarily invest in the seed stage and take the risks — sort of deep J curve — that early investments have before they kick up; and had the flexibility to invest in tokens.

It just became apparent that, once there were a dozen different investments that we didn’t consummate, and some of them we walked all the way up aisle — that was getting a little frustrating: Protocol Labs, Blockstack, Brave, some of the other AI ones. So it makes sense to create a dedicated, a specialized vehicle, because you know as I think we’ve seen it actually specialization counts for a lot in this space: in the community, deal sourcing, understanding liquidity profile, custody, staking and generalized mining if you will. Therefore, it make sense to get a new vehicle, a new fund structure, to joint team together.

So the Fabric team came from that that thinking process. I’ve begun a bit in 2016 and in the middle of 2017 it came together. We’re making those first investments, and then it took a little while between then and this spring to extricate ourselves fully from Open Ocean faster.

Mable: Since then you guy did quite a few investment around the Web 3 thesis.

Richard: Yeah. So 20 deals in roughly just under two year period.

I’ll give my quick cut on the work thesis; and then there’s some commentary on how it’s evolved since the back end of 2017 and our minds.

I personally got attracted to being on the investment side between 2009 and 2010. Excited by the innovation going on in Y Combinator and other startup and seed camps like Andreessen Horowitz. But for a few years, because I built many B to B, fairly deep tech companies, for a few years I got romanticized by the idea of doing more consumer facing things, doing sports fan networks, delivering wine and food, and other accessible stuff like that.

I think I have actually been desired to be able to describe the things I was investing in at cocktail parties and have people go“oh yeah, I get that”or“I use that”; versus describing“oh yeah i’m looking at natively sharded layer one solution for distributed ledger technology”that doesn’t normally get you as far in the cocktail party (laugh). There were three years I was languished, that I referred to a“Peter Thiel”phase, because Peter Thiel tweeted,“…we were promised flying cars and all we got was 140 characters.”

It’s like, where are really truly exciting and fundamental innovations?

My second software company had been based on the basics of expert systems, on ontology and semantic reasons. So when it was not a fashionable look at AI, obviously we started to see the renaissance of AI when suddenly it could spot cats and photos and stuffs. And then in 2013 with my introduction to the bitcoin, the thesis started coming together. You have 5G, cryptographically infused data structures, and algorithms — together that stack for us is Web 3. It is the mach long heralded semantic web that allows software and software machines to to interact in a kind of arbitrary fashion, and hopefully use the vast quantity of data that’s increasingly available to deliver amazing and highly intimate in human centric services. To to the both the human population may be to animal population as well — maybe just to the planet. That’s how our Web 3 thesis came together, for me at least.

Max: What we can add to that is the evolution of the thesis over the past year. We’ve seen a space evolved largely followed itself in going off the stack: going from layer one solutions to some developer tools now, and maybe in the next couple of years consumer facing applications are vertical specific applications as well.

But we’ve also seen an evolution in this so called business models. So early on it was all about storage of value, assets such as Bitcoins; and then you have smart contract platform such as Ethereum, which required the native asset to pay for transactions. But then very quickly there was a bunch of different projects that had decided to integrate a payment mechanism or payment token within their network. Those projects assume that if there would be traction on the network, that payment token itself would accrue value as well — such assumption was far from proving itself to be true.

Now today we see a lot of work going on around Work Tokens, which we are extremely excited about. Work Tokens — tokens that you would stake, getting the right to provide work to the network. You can think of them as a collaboration mechanism or coordination mechanism for suppliers of a network. That evolution is one that happened in Web 1 and Web 2 as well, where you had different business models that were trial and tested and some failed and didn’t. Ultimately we have one or two business models that actually come out to be quite successful and drive the whole wave.

We believe that now with the Work Tokens we might have discovered one of those opportunities — one of the dominant business models. Although it’s in the very early phase, that’s one of the aspects of the investment thesis which has definitely evolved over the past year.

Mable: Do you think any of the Web 2.0 participant would like turn themselves into Web 3.0? I think this is a really interesting question to ask everyone. You mentioned about the business model — a lot of the payment token don’t have native traction. Signal, on the other hand, with their existed traction, tried to pivot themselves through MobileCoin (set aside whether the token is needed or not). So do you think any of the 2.0 big platforms could continue to play a major role in the 3.0 era, or do you think the big players will come from the native 3.0 start-ups?

Richard: It is famously hard to innovate, even in just terms of creating a new product from within a large organization.

There are lots of books written on this topic. The Innovator’s Dilemma by Clayton Christensen. And then Geoffrey Moore wrote The Gorilla Game, Crossing the Chasm, Inside the Tornado, and then a fourth one, (Note: Zone to Win) which is about innovation within organizations. It wrote about how you have to totally ring fence the innovation unit, because you know success metrics will be entirely different for that part of the organization from everywhere else. Otherwise, you’ll get problems with cannibalizing budget; or, if you’re successful and can generate more revenue, then people get jealous.

So I just mentioned that because it’s hard enough creating a product that have the same business model, because large companies will have a lag to it to it. But if you’re trying to create an entirely different business model, that seems probably hard to make the switch. So I don’t know how they’re thinking about that. It may be easier for Telegram — I don’t know whether there are many people looking at Pavel’s shoulder and telling him exactly how he should or shouldn’t do it. And he can drop the metrics for one business model and switch to a new one, or somehow you know safely run the skunk works.

Much harder, presumably, even though of course Zuckerburg has got a lot of control in Facebook, it is much harder for him to do it, because they are publicly listed. Also I don’t know how you transition away from the ad model, maybe through a phasing plan where he shifts the meta data, spins up the new Libra based network, and does new app on top that make money. I don’t know.

It’s tricky — hats off to the Zuckerberg for making this year blockchain for him, and really getting his head around that many agile and young leaders, and engaging in the technology.

Max: I think over the next couple of years we’ll see the difference.

Some of the old players are continuing with their traditional models, and at some point they might become not necessarily obsolete, but might lose some of their dominance.

Probably quite a small number of Web 2 other players will try to make the transition, as Richard mentioned earlier they are going to completely cannibalize their current revenue models. This is a very difficult decision to make.

A good example to look at is the gaming space, where a lot of the value that people have been assigning to using a non-fungible assets / tokens within games, is that you could be able to port them from one game over to another. You could actually have them fully sovereignly held by the players.

But the whole business model behind games today is to have these close ecosystem in which the game provider is the only entity that’s a game creator, the developer is the only entity that has the ability to actually sell items, whether they are skins, swords, any item or a piece of land, and that’s source of their revenue. So all of a sudden if they open up specifically that parts, it will completely break the model for those, so there’s very little incentives for those established players to change their business models. That’s counter-incentive.

Mable: Yeah by nature the company or corporation structure is always contradictory to to DAO. Do you think, this is a question I asked myself as well, the company structure specifically will continue to exist, or, will more and more DAO become prevalent?

Richard: I mean, I always feel like on sedimentary layers nothing ever goes away.

If you got new forms of organization that might be better suited to certain purposes, once the invention has occurred, they can be deployed. We’re starting to see that whether it be for an innovative way of funding a political campaign or for getting capital but better allocated.

If you believe it’s a better approach to capital allocation and you believe that somehow a DAO can combine some of the scale and capital access of crowd funding with the judicious due diligence and specific specialist insight of venture capital in a new potent kind of mix, then it should deliver some returns to a significant amount of capital, and then it will become a new asset class or a new style of investment.

It feels like that’s possible, but I think it’s relatively early.

Max: I do feel like it comes back to the question of of business model. If we can just organize ourselves to do collective actions for goods, that will have certain impacts on the world, but won’t completely change how business is conducted. Because most people are revenue driven, or at least most corporations are currently revenue driven. So coming back to this idea of of the work token that might fundamentally change the current theory of the firm.

Instead of having a set of stakeholders that then incentivizes a set of employees to come together to produce and create productive work, you could have a network that all the stakeholders are effectively the suppliers. Because they have interests and right to provide profitable work, so they supply the network. Yet, they also have the interest of network that are going in their direction, so that secures the quality of supply that are being provided to the network. This cycle sort of creates a flywheel effect that leads to better quality work and more usage — a crazy network effect in that sense.

In that perspective, that’s one of the types of networks that could actually change the current enterprise that we have today, because you can actually reach much longer tail and suppliers that just generally wouldn’t otherwise come back to collaborate and work together.

Richard: The way we thought about the work token is a new software driven instantiation of something in a sense existed before the cooperative model or the mutual model. The point being we’ve seen that that can be effective: applied to whether insurance or basic farming product it can have pretty effectively. It’s a kind of disaggregated version of a corporation, instantiated in software to make more work more effectively than had been the case before. And more extended because you could have a cooperative of different suppliers who are rewarded for their participation in this new organization, but you can extend some of the benefits and rewards to the customers as well through a similar concept to work token / membership token, or maybe they exist in both categories(suppliers and customers) at the same time.

It doesn’t mean if you do that, that you have to have a a decentralized approach to governance. You can have a building society, or a building society version of a bank that is entirely centrally run. I worked with some, most of them are that way. Normally their owners are their customers. But generally speaking the owners don’t vote about anything.

Mable: I do think in the future, with certain protocol, each small social unit that are currently connected by social customs could become a DAO. There might be some sort of a platform, large and small, beneath these interconnected groups, almost like Polkadot. Social connections that were relatively stable in the past might be shaken. Family is a very good example because the current family structure comes from a perspective of easier management / understanding lineage, or taxation purposes. Apologies if we were a bit digressed here.

Richard: It’s always good to think back. It’s good to get yourself out of the mindset how things happened in the last couple of hundred years. This is back to the question of how to humans organize themselves, and that has been evolving for thousands of if not millions of years.

Indeed you’ve got this kind of this nesting of interrelated organizational structures at different levels of scale. Depending on the scale, there were different organizational models, whether it be dictatorship, or socialism, or religion, or whatever that seem to be effective. Then if you can instantiate these different models with the appropriate governance rules and restrictions, and economic reward model in software, which is kind of what DAO is, then why not do it that way?

I was discussing with someone earlier with some Russian that you have that difference in terms of organizational structures, but you also have this cycle within a given society: you might go through chaos to democracy to oligopoly, treating them as a natural seasonality. The pendulum has to swing back and forth. In an organization it’s kind of naturally goes that way — you hope it’s not too drastic, but it’s quite hard to just keep the thing still and stable, because the system is so complex.

Max: It’s only once the pendulum has swung far enough one side that people have enough incentives to actually try to swing it back into the other direction. But I think to the question of DAOs, it might be even more applicable to much larger organizations because if you think back to how we organizationally structured in ourselves as humans for a long time, the question has always been to what extent can you create trust among a larger and larger group of people.

So when we started off with indeed some small families and tribes. And then we had large cities coming together where people knew that a certain baker had a reputation of being a baker and a plumber being a good plumber. You could have a circle of trust between people who might have used them before; that creates a link of trust where people could interact with each other and conduct business. Now if you can have that same level of trust not only in cities, but instead over the entire world effectively by having this digital version of trust, you can actually organize yourself societies at a much larger scale via DAOs. That might be a much larger sense of people coming together.

Mable: That’s very interesting. Yeah, I think it would bring a lot of changes to the social customs. At the beginning of history people create laws or a set of “codes” to form the social organizations — families, armies, bureaucratic structures…it’s easier for the rulers to manage.

Even like avoiding social instabilIty — to some extents you don’t want a lot of chaotic relationship across different people. So the managers would want to manage smaller and more standardized units. What we have right now and what we are facing is more than change of governance — it’s a paradigm shift in how the society organizes itself.

Richard: We sometimes describe that, and also what Max gets to, is a kind of a global village, to the point where you know you can trust anybody on a peer to peer basis in the implicit way you do a member of a village or family.

We think of the village probably is something that would have the family units the way it used to: residents in it, and there are 100 family units in the village; whereas what you’re describing goes back to kinda more chaotic state which is like the global tribe, deconstructing the society back to to some more fundamental primitives down to the individuals and how they might want to interact.

Mable: I actually don’t know.

Richard: (Laugh) I’m certainly not qualified to know to give you a definitive answer. I feel like we’ve gone down to the sociological philosophical direction.

Mable: Yeah that’s actually one thing I do like about this industry; people tend to think beyond just technology.

Richard: Yeah and even more than just a business.

Mable: (Smile) Let’s bring it back to discussing governance.

What’s your thought in terms of investing in DAO? Right now quite a few groups are developing protocols, SDKs, so on and so forth; but on the other hand, there were very few proven succeeded cases for DAO. So do you think these protocols and tools are needed at the moment?

Richard: I reference obliquely this cycle that occurs where an application based on the available infrastructure / building blocks become accessible, and then suddenly a wave of success comes out. Then there may be an idea of what the problems are, with the next wave of applications coming out, infrastructure getting built and then off of it goes.

We have seen versions of DAO appear to greater or lesser extent with on and off chain governance taking place in these decentralized systems that have been built in successfully. They’ve been harnessing the productive work of women, men, and machines.

Now people have built these SDKs or templates and have been speculating on what next the next wave might be around, but it’s never certain. So this could be a lot of experimentation until something actually takes off. Sometimes the reason it hasn’t taken off is because nobody’s happened upon the right problem to solve, and sometimes because it’s just too unusable to get off the ground, or some combination thereof.

Max: It’s also because at the very early stages there are just so many big differences among the use cases of decentralized autonomous organizations. If you take anything from MolochDAO to MetaCartel to MakerDAO or even the original theDAO. There’s a lot of modularity needed in terms of features, whether it’s in terms of attribution, in terms of allocation of work, in terms of actual governance and voting, and in terms of reputation. There’s not a set of standard layers or product people that you can just put on those blankets and apply to any DAO. I think we’re still early where there’s a lot of discovery as to what actually works and what doesn’t work. Once we have a bit more confirmation around that people might actually start using best practices which indeed will lead them to framework and tools for DAOs.

Mable: One last question, we all know there are quite a few public trains running and coming out. This year we have Cosmos and Polkadot came alive. So what’s your expectation for the next one to two year for the whole field be like, with the two I highly expected interoperability platform available?

Richard: I’m not sure that interoperable blockchain is something much of a burning need right now, or other, I’m sure we’d find ways of using blockchain. I’m sure that in the future that the those decentralized applications may well be formed from the composition of applications sitting on different blockchains that are suited to the particular purpose that those applications have been designed for. However, I’m not sure interoperability is what blocking us from getting a whole bunch of adoption.

I have been able to appreciate the important differences between Cosmos and Polkadot. But one argument that seems to play in Polkadot’s favor is the fact that any parachain can benefit from pool security. That means that of the various hurdles to innovation you have to get over at the beginning, that question of security is something that you can take off the table. You then just got to address the questions of getting great human capital and access to users on other aspects of innovation. So that seems powerful because perhaps it means they’ll be a a rush of innovation of new chains that support particular use case. We’re just talking to some potential portfolio members that might apply.

Max: I guess Cosmos’s counterpoint would be that many larger chains would not want to pool their security with any other chain. I do believe that in the future every chain can be very highly personalized for certain applications. A lot of applications will want to have their dedicated chain or at least build the application on top of a very specific chain optimized for certain parameters.

I think that fits the parachain model from Polkadot pretty well because you might have certain parachains that are optimized for speed of transactions, some are optimized for security, and others just have a better tooling. So you have different application that will choose different parachains to build on top of, and while there is actually a large dispersion of these different parachains, they all still get the benefit of pooled security. So that’s definitely the model that we’ve been really excited about in the past couple of years.

Mable: Right, to your point about each chain would have a specific use, I did think about maybe even for some more complicated MMORPG games, each could have its own chain.

But it’s interesting to see all these highly similar POS public chains are still hanging there so I don’t know how it will be in the next two years — that’s the reason I asked you the question.

What do you think of all these coexisting chains’ end state going to be?

Richard: I mean if there’s not a sufficiently distinct reason for a chain to exist then I suspect that they will get consolidated, probably driven by the network effect of development community. But not that it’s easy to consolidate developer communities. So it’s probably not like you can guns on a pirate raid and steal the community; they only more like died through lack of oxygen and then shift across.

I think some people actually thinking about that in a slightly kind of Machiavellian sense of building alternative chains. I think this applies to a few different projects in a manner that their ambitions are plausibly deniable. But ultimately their position is a bit of a smokescreen for the future of global chain hedgemony.

Max: It was interesting yesterday at other event where we had a panel with Parity, Polkadot and Keep were just announced tBTC. You had Matt Luongo from Keep sitting in between, the Parity Polkadot person and the Cosmos IBC person. Someone asked what’s the end state, is it a winner-takes-all markets or will there be a room for multiple base layer chains. Both Polkadot and Cosmos claimed that they see a lot of room for collaboration, and actually they see their work beneficial. And Matt from Keep sitting between them, said that he actually clearly believes that there is a large opportunity for a winner-takes-all market but him won’t comment any further (laugh).

Richard: Let’s “Keep” them separate for the moment.

Mable: (Laughed) I figured you like puns.

This is a very fruitful discussion today! Thank you very much for the time.


The leading blockchain research institute and blockchain media in China.

Mable Jiang

Written by

Partner @ Nirvana Capital | Contributor @ BES Lab


The leading blockchain research institute and blockchain media in China.

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