Introduction by Jamie Burke
Hopefully by now, you are familiar with Outlier Ventures and our investments. As a venture platform with finite resources to fulfill intensive advisory work, we have so far chosen to focus on areas we believe to be most impactful and profitable: the intersections of deep technologies like AI, IoT and the Next Gen Data, enabled by tokenized and open source distributed ledger technologies. You will probably know we term this The Convergence Ecosystem. We have however (since 2015) always said this requires much more to accelerate and strengthen this vision beyond protocols to mainstream and widespread adoption.
We have recently begun referring to this as The Convergence Economy which extends our investment thesis to the ‘picks & shovels’ as well as new capital markets infrastructure. It is this we wanted to share with you today to help contextualize some upcoming projects and activities we have been working on for several months.
It has been our belief since our first paper on the subject back in 2016 that Deep Tech will increasingly reinforce one another and ultimately lead to the creation of The Convergence Ecosystem. We define this as an increasingly decentralized, automated Web that enables high degrees of operational and economic autonomy for people, agents (bots) and machines. That means both p2p in a human sense but importantly m2m (machine to machine), a2a (agent to agent) and combinations thereof.
We see this existing broadly in several layers (see below) and most applicable, but by no means limited to, markets such as Industry 4.0, Health, Energy, Smart Cities and Mobility.
The Convergence Economy
As previously stated, to date our focus has been primarily on tokenized protocols that serve as foundational open source software infrastructure to The Convergence Ecosystem. While we believe this is ultimately where most of the value of Web 3.0 will reside in the long term, there are many other enabling opportunities that will be critical to the economy to go mainstream, allowing both more institutional and retail money to enter the market, but more importantly real world user adoption and ‘network market fit’ through vertical integration. We believe equity-based businesses still have a valuable role to play in this economy, both as on off ramps but also for real world, revenue generating, service based business to make the technologies usable for everyday people and enterprise.
This is recently why Rumi Morales joining Outlier has been strategically important to these extended activities. Her background at Goldman Sachs and CME Ventures gives us greater depth investing in capital markets and more traditional venture companies in related Deep Tech including some of the most successful businesses that have appeared around crypto like Ripple (the company), Digital Currency Group & Digital Asset Holdings.
Going deeper with Rumi Morales
Areas to Strengthen & Accelerate
With The Convergence Economy we are looking to both strengthen and accelerate the adoption of an open-source, decentralized digital economy across more traditional industries. “If you build it, they will come” sounds nice but in practice digital infrastructure needs additional components to bridge to existing institutions to become more readily and widely adopted.
In practical terms, this first means integrating crypto into existing markets and systems in a compliant, enforceable and secure way. For us, this includes increased attention on legal and regtech, particularly around smart contracts and inter-ledger transactions and communications. There are still gaping holes around compliance, audit, arbitration and enforcement, and without advancements in these areas, adoption of Web 3 by more institutions and people will take far longer than it should.
Similarly, it means identifying the new wave of financial technologies and tokenized capital markets infrastructure to improve asset stability and liquidity in high-velocity, decentralized systems, and ultimately support autonomic economic agents. Stablecoins and decentralized exchanges are a start, but we need to see further developments in custody, trading tools, crypto on-ramps, and liquidity routing, among others, to support the greater ubiquity of protocols.
A third area is greater emphasis on the T, the “things” in IoT, rather than just the value transfer component of the internet. We need to focus on securely connecting hardware devices through embedded software and even network connectivity itself. On the former we have begun looking at a number of security companies that address concerns over quantum proof encryption and communication channels, and on latter we have begun to engage with a number of multinational corporations that are the gatekeepers to m2m connectivity as well as deepening our engagement with digital manufacturers and IoT innovation centers to facilitate their membership’s greater engagement with crypto assets and blockchain. Many have already begin to co-invest with us into our portfolio’s pre-sales.
In the months ahead, we plan to scale the Outlier Ventures platform to address these opportunities and target key components of the broader Convergence Economy. As always, we invite interested founders to reach out to us if your projects match this thesis as well as any enterprise partners building in this space.
We look forward to sharing some exciting announcements in the coming months. Remember carry on and keep building.