One of the things that I’ve always found compelling about web3 is the concept of user-owned networks. In web2, many networks were built on the backs of their users and developers. As the famous Chris Dixon example goes, networks and platforms do what they can to attract and cooperate with ecosystem participants early on. Then, as they hit the tops of their growth S curves, they pivot to value extraction and compete with the complementary applications that got them there in the first place. Web3 companies work to avoid this dynamic by giving the participants who help build and grow the network ownership in it. This is a powerful concept and an important ideal. It helps bootstrap networks and creates trust, guarantees, and aligns incentives.
They do this to strengthen their network effect. As platforms move up the adoption S-curve, their power over users and 3rd parties steadily grows.
One of the things I am interested in is web2 companies applying this web3 superpower to their domain. I am beginning to notice more of it in the wild. There are different flavors of this ranging from profit sharing to owning actual equity in a company. Bookshop.org gives 80% of its profit margin to independent bookstore in its network. It doesn’t have to do this, but it strengthens its network and creates preference in both buyers and sellers on the platform. When I buy books online I make sure to do it on Bookshop. YouTube has done an exceptional job nurturing its community of creators by famously awarding them 55% of the network's ad revenue.
With regards to equity, Nebula TV has taken a bold approach awarding the creators who produce content for the platform with 50% ownership. And while it may have been more of a marketing stunt than a thoughtful distribution of ownership, NuBank awarded $11.2m in stock to its depositors when it went public. I am sure there are plenty more instances of this happening, and I want to learn more about them.
I find these examples exciting because they are representative of a movement that distributes ownership of internet properties across a broader set of constituents. I hope that this type of practice becomes commonplace because the people who supply the products that power networks - whether books, content, money, or otherwise - should have incentive to stick around and participate in the upside. I don’t think all companies need to give away majority chunks of ownership to their network participants, but token gestures go a long way in establishing trust and preference.
I would like to see more of this, particularly companies that are able to harness this superpower and deliver it to users in a way that abstracts away the complexity of crypto rails. The concept is one of the most powerful things that can drive incentive alignment and value creation on the internet, and I think it can help web3 cross the mainstream chasm.
AI is fundamentally changing the way we interact with technology. It has started with language and voice as an interface, and it will continue with the rise of agents. I think of agents as pieces of software that can do your bidding on the internet. They can navigate web, mobile, and desktop applications to accomplish tasks on your behalf. The recentRabbit launch demonstrated to us what this can look like.
Andy and I have been working on our thesis at USV around self-directed healthcare. We published it yesterday on the USV blog. The gist is that people are fed up with the existing healthcare system, and a movement has formed at the edges of the market. It consists of individuals who want to take their health in their own hands and a variety of products and services that empower them to do so.
One of the things that I’ve always found compelling about web3 is the concept of user-owned networks. In web2, many networks were built on the backs of their users and developers. As the famous Chris Dixon example goes, networks and platforms do what they can to attract and cooperate with ecosystem participants early on. Then, as they hit the tops of their growth S curves, they pivot to value extraction and compete with the complementary applications that got them there in the first place. Web3 companies work to avoid this dynamic by giving the participants who help build and grow the network ownership in it. This is a powerful concept and an important ideal. It helps bootstrap networks and creates trust, guarantees, and aligns incentives.
They do this to strengthen their network effect. As platforms move up the adoption S-curve, their power over users and 3rd parties steadily grows.
One of the things I am interested in is web2 companies applying this web3 superpower to their domain. I am beginning to notice more of it in the wild. There are different flavors of this ranging from profit sharing to owning actual equity in a company. Bookshop.org gives 80% of its profit margin to independent bookstore in its network. It doesn’t have to do this, but it strengthens its network and creates preference in both buyers and sellers on the platform. When I buy books online I make sure to do it on Bookshop. YouTube has done an exceptional job nurturing its community of creators by famously awarding them 55% of the network's ad revenue.
With regards to equity, Nebula TV has taken a bold approach awarding the creators who produce content for the platform with 50% ownership. And while it may have been more of a marketing stunt than a thoughtful distribution of ownership, NuBank awarded $11.2m in stock to its depositors when it went public. I am sure there are plenty more instances of this happening, and I want to learn more about them.
I find these examples exciting because they are representative of a movement that distributes ownership of internet properties across a broader set of constituents. I hope that this type of practice becomes commonplace because the people who supply the products that power networks - whether books, content, money, or otherwise - should have incentive to stick around and participate in the upside. I don’t think all companies need to give away majority chunks of ownership to their network participants, but token gestures go a long way in establishing trust and preference.
I would like to see more of this, particularly companies that are able to harness this superpower and deliver it to users in a way that abstracts away the complexity of crypto rails. The concept is one of the most powerful things that can drive incentive alignment and value creation on the internet, and I think it can help web3 cross the mainstream chasm.
AI is fundamentally changing the way we interact with technology. It has started with language and voice as an interface, and it will continue with the rise of agents. I think of agents as pieces of software that can do your bidding on the internet. They can navigate web, mobile, and desktop applications to accomplish tasks on your behalf. The recentRabbit launch demonstrated to us what this can look like.
Andy and I have been working on our thesis at USV around self-directed healthcare. We published it yesterday on the USV blog. The gist is that people are fed up with the existing healthcare system, and a movement has formed at the edges of the market. It consists of individuals who want to take their health in their own hands and a variety of products and services that empower them to do so.
, agents are the universal remote. This begs the question of whether web2 companies that have built business models on top of pre-AI interaction models will adapt or even participate in the agent world. If services like Uber, Kayak, and Instacart generate a meaningful amount of revenue through advertisements and cross-selling products, will they want their application interfaces to be abstracted away by an agent? Are they okay with their customers never interacting directly with their applications and losing their eyeballs? Their incentive structure is at odds with agent proliferation. This is a potential innovator’s dilemma in the making.
New conversational interfaces made possible by AI will create a new category of “agent native” applications. Since agents will interact with them instead of end-users, these applications will be headless by nature. They may be entirely unknown to users and simply run in the background, happily playing their part in a series of chain reactions. These will be protocols that our agents call on in the world of bits and they will also bridge to atoms (eg ride-sharing, grocery delivery, etc.).
This is likely a scenario where AI and crypto will betwo sides of the same coin. AI will create the need for agent-native headless applications, and web3 will step in to fill the void. Web3 applications and protocols can accommodate the new ways in which we will use technology (i.e. conversational and voice-centric interfaces with agents working for us) because they do not need to “own” end-to-end customer experiences unlike most web2 companies. They are happy to run in the background as composable job-doers. They don't need their brand names front and center because their tokenized business models, which are primarily straightforward and network usage-based, are positioned to thrive in this world, especially relative to their web2 counterparts.
I suspect we will see more and more of these “two sides of the same coin” scenarios emerge as AI and crypto continue to weave their way into our daily lives.
. I have been going on a years-long personal health journey. This is a space I care about a lot.
One of the things I've noticed is that many entrepreneurs envision the same end-state. They want to be the AI advocate and doctor that is always on and personalized to everyone who uses the service. The way they plan to get there is by accumulating large datasets on customers through a variety of different mechanisms: biomarkers through bloodwork, diagnostics and scans, self-reported information, wearable and sensor data, etc. It's a very unique moment in time where a lot of founders share a similar vision but have very different approaches to get there.
I think it's important that whichever approach a founder takes, they must build a good business along the way. Not everyone is going to get to the holy grail, but a lot of people can build great companies while they try. There are likely many different viable paths, some direct to consumer, some through practitioners in the existing system, and others I can't even imagine. Each will have their own pros and cons. I don't think this is a winner takes all market. It is so large. But value will absolutely accrue to the players that accumulate the most data the fastest, successfully use that data to create experiences that drive positive and measurable results, and build trusted brands.
There are some open questions I have and some we have discussed as a group at USV about unknown dynamics:
Will direct-to-consumer companies need to partner with known celebrities and medical influencers to achieve scale? We have seen how credible influencers with their own distribution channel and following can help get a business off the ground rapidly: Peter Attia and Early, Sam Harris and Waking Up, Dr. Becky and GoodInside, Andrew Huberman and Athletic Greens, Tim Ferris and Momentous, Mark Hyman and Function Health, countless celebrity endorsements of wearable companies, and many more. I do not think this is a pre-requisite for success, but it certainly has proven to help jumpstart the early stages.
Are many solutions marketing wrappers for someone else's product? If a company is selling someone else's product or service to accumulate data on customers, what does that mean for barriers to entry? Does the wedge need to be proprietary, or can it piggyback on something else? How does one think about exclusivity and/or other dynamics with these partners?
If barriers are low and the movement continues to pick up steam (as I suspect it will), will D2C customer acquisition channels quickly become a race to the bottom? We saw unsustainable margin compression in most D2C companies over the past decade. Digital acquisition channels quickly get arbitraged and unit economics go upside down. Will similar dynamics be at play and if so when?
These open questions are not deterrents by any means, but they should be proactively addressed by entrepreneurs along with a convincing view of what makes their approach genuinely unique.
I am excited to see how this space unfolds and think we will see a shift in consumer behavior and participation in self-directed healthcare much more quickly than we thought possible. Most of all, I love using these products and trying new services and am eager to continue to partner with great entrepreneurs building them. The tailwinds are strong and society is embracing change. A generation of iconic companies that empower consumers to live healthier lives are getting started right now.
, agents are the universal remote. This begs the question of whether web2 companies that have built business models on top of pre-AI interaction models will adapt or even participate in the agent world. If services like Uber, Kayak, and Instacart generate a meaningful amount of revenue through advertisements and cross-selling products, will they want their application interfaces to be abstracted away by an agent? Are they okay with their customers never interacting directly with their applications and losing their eyeballs? Their incentive structure is at odds with agent proliferation. This is a potential innovator’s dilemma in the making.
New conversational interfaces made possible by AI will create a new category of “agent native” applications. Since agents will interact with them instead of end-users, these applications will be headless by nature. They may be entirely unknown to users and simply run in the background, happily playing their part in a series of chain reactions. These will be protocols that our agents call on in the world of bits and they will also bridge to atoms (eg ride-sharing, grocery delivery, etc.).
This is likely a scenario where AI and crypto will betwo sides of the same coin. AI will create the need for agent-native headless applications, and web3 will step in to fill the void. Web3 applications and protocols can accommodate the new ways in which we will use technology (i.e. conversational and voice-centric interfaces with agents working for us) because they do not need to “own” end-to-end customer experiences unlike most web2 companies. They are happy to run in the background as composable job-doers. They don't need their brand names front and center because their tokenized business models, which are primarily straightforward and network usage-based, are positioned to thrive in this world, especially relative to their web2 counterparts.
I suspect we will see more and more of these “two sides of the same coin” scenarios emerge as AI and crypto continue to weave their way into our daily lives.
. I have been going on a years-long personal health journey. This is a space I care about a lot.
One of the things I've noticed is that many entrepreneurs envision the same end-state. They want to be the AI advocate and doctor that is always on and personalized to everyone who uses the service. The way they plan to get there is by accumulating large datasets on customers through a variety of different mechanisms: biomarkers through bloodwork, diagnostics and scans, self-reported information, wearable and sensor data, etc. It's a very unique moment in time where a lot of founders share a similar vision but have very different approaches to get there.
I think it's important that whichever approach a founder takes, they must build a good business along the way. Not everyone is going to get to the holy grail, but a lot of people can build great companies while they try. There are likely many different viable paths, some direct to consumer, some through practitioners in the existing system, and others I can't even imagine. Each will have their own pros and cons. I don't think this is a winner takes all market. It is so large. But value will absolutely accrue to the players that accumulate the most data the fastest, successfully use that data to create experiences that drive positive and measurable results, and build trusted brands.
There are some open questions I have and some we have discussed as a group at USV about unknown dynamics:
Will direct-to-consumer companies need to partner with known celebrities and medical influencers to achieve scale? We have seen how credible influencers with their own distribution channel and following can help get a business off the ground rapidly: Peter Attia and Early, Sam Harris and Waking Up, Dr. Becky and GoodInside, Andrew Huberman and Athletic Greens, Tim Ferris and Momentous, Mark Hyman and Function Health, countless celebrity endorsements of wearable companies, and many more. I do not think this is a pre-requisite for success, but it certainly has proven to help jumpstart the early stages.
Are many solutions marketing wrappers for someone else's product? If a company is selling someone else's product or service to accumulate data on customers, what does that mean for barriers to entry? Does the wedge need to be proprietary, or can it piggyback on something else? How does one think about exclusivity and/or other dynamics with these partners?
If barriers are low and the movement continues to pick up steam (as I suspect it will), will D2C customer acquisition channels quickly become a race to the bottom? We saw unsustainable margin compression in most D2C companies over the past decade. Digital acquisition channels quickly get arbitraged and unit economics go upside down. Will similar dynamics be at play and if so when?
These open questions are not deterrents by any means, but they should be proactively addressed by entrepreneurs along with a convincing view of what makes their approach genuinely unique.
I am excited to see how this space unfolds and think we will see a shift in consumer behavior and participation in self-directed healthcare much more quickly than we thought possible. Most of all, I love using these products and trying new services and am eager to continue to partner with great entrepreneurs building them. The tailwinds are strong and society is embracing change. A generation of iconic companies that empower consumers to live healthier lives are getting started right now.
