VC Office Hours #2: Luc de Leyritz, Re7 Capital

Transcript

topics and the topic of the day is UX in web 3 with a special focus on uh UX in apps and protocols. Um this is the the core focus of our guest today Luke Lit. Hi Luke, it's a pleasure to to have you there today. Thanks Raf for this uh awesome intro and and thanks for positioning a little bit how you guys you all the things you guys do. It's um yeah, super happy to super happy to be here. Thanks for inviting me. Um yeah, maybe you want to start immediately with a very quick intro. Yeah. Yeah. I'll tell you tell you tell you who I am and and and what we do at RE7 and then we can dive into um into into into the specifics. The the the quick intro to me is I've been investing at the precinency

stages for the past 5 years of which the past three and a half specifically in crypto. Um I currently do it within a fund called RE7 RE7 which is a big um liquidity provision fund that's been around for around 5 years and now controls over half a billion in assets across a bunch of different strategies but mostly DeFi liquidity provision um as well as recently um so long liquid and I lead the venture fund that we're building um and that we're raising at the moment that we raised a significant chunk of already and that we're deploying.

Um, and this venture fund, and we'll get to that afterwards, is is very tightly focused on this idea of of good user experience and and especially at the consumer level. Um, before being at RE7, I was with a fund called Cherry Crypto that that we set up within a broader venture fund called Cherry Ventures. It's a it's a fund, a European fund that's 10 years old. It's 1 and a half billion AUM. We um we built a crypto fund basically under the umbrella of Cherry um from which we invested in companies like Moro, Cow Swap, Maple Finance and and a bunch of others. Um and before that I was well in traditional venture uh investing in data infrastructure fintech. Um so a little bit less UX

heavy um I would say but already then you know it's funny because I I looked at all my notes that been taking over the years on topic of of of UX and actually this is the first time that I really went deep on the idea of uh audio as a as a new uh interface. And so that was already already kind of a part of it. And before that uh very quickly I was with the French army for a couple of years um sort of the DARPA equivalent of of for the French army doing advanced tech research for national security and my academic background is is mostly philosophy with a bit little bit of formal logic statistics and and programming. So um that's me that's the fund um yeah we take these we we take this however you guys want to do it. I think I'm sure you know it will be

organic and very grassroots. The idea is that we don't enter into keynote or discussion between you and I. The idea is that from we have people engaging with you and asking questions and maybe to set the stage I just want to I mean to make sure that we have also a good UX here in this uh type of zoom format which is not very easy but uh let's try to do our best. So first it starts with a good microphone. So I hope that you can hear me well guys. And second thing, second thing, second thing, sorry. Um, what I will do, I will just highlight a couple issues that I believe are some issues we're facing in the UX in web 3 and you will grade them from zero being a non-issue to five

being like a very hard issue. Are you okay for that? Yeah. Is that me or is that everyone? Yeah, you. Okay, that's me. Beautiful. just is also a kind of housekeeping thing but it would be awesome um when we go to questions um I think we have time and we're not so many in the room so before any of you ask a question it'd be awesome if you can also you know tell us all high level you know what you do and and and and who you are that I think that that'd be also super yeah interesting for me to to get a sense and I'm sure for others as well but yeah let's you know uh let's start start the rapid fire on on the UX issues exactly yeah so um this is what I'm going to just now. So yeah, please mention your name and what you are

building in like one or two bullet points maximum and also because you are mentioning the time I am mindful of everyone's time. So we have up to an hour but in case we believe that uh we we we came uh to a conclusion earlier than that we are happy to you know to shorten the the the event and make it like only 40 minutes 45 minutes or even less than this. We just want to make sure that everyone is at ease and we don't want to brute force, you know, people to stay in the room and ask questions that are potentially a bit forced. So yeah, this is something we want to change as well. You know, it's not a one hour format. It's up to an hour. Okay. So um all right. So a few high level issues I believe are some

issues. So um trust building challenges. Hm. So five, yeah, five is like the the biggest problem and zero is something that is already achieved as an issue and addressed I would say or an existing problem. Yeah, I think it's I think it's five. It's five. I give you Yeah, I think it's five. And it's it's I mean this one is an easy one because I have the market to back to back me up. Um and so the way the reason why I think it's five is as soon as someone finds an a way to solve um the trust issue and and and there's a bunch of interesting mechanisms to go about it. You see uh a lot of money being made. Um I think the

clearest example of that was uh Pump Fun, right? Like you know Pump Fun is like horrible interface. It's not a nice product to use. It's not particularly fun. You know it's it's kind of brain damaging. But what they did I think and and that probably is the main thing they did really really well is they solved the trust issue super small trust issue the rug the rug issue right that you can take the liquidity from the from the tokens you launch um and that's 600 million in revenue for this company and you know how I don't know how many many additional billions in in trading volume so I think it's yeah I think it's like such a clear sort of indication of of of um of of that specific Um, yeah, like there's so much to do there. Yeah,

superb. Thank you. Let's take a couple more. And I like the way you grade and give an illustration. So, let's continue like this. Um, private key management complexity. Ah, that's a good one. Actually, don't think this one is that big of a deal anymore. Um, it's probably between a two and a three. Let's put it at two and a half. Um, and and the reason why the reason why I don't think it's that much of an issue anymore is is now you have these like embedded wallet providers. Um, I think the clearest one is is is Privy. And what these guys offer for those of you who don't know, they they let you as an application create a wallet for your users based on

their social login or their email address. and the users don't really have to ever see ever see the private key. The the clearest example of that um illustration wise would be um Farcaster's recent uh embedded wallet. So Farcaster had no wallet. Um they created one I don't know 3, four, five weeks ago now and you know instantly 80,000 people um had a wallet. They have no idea where the private key is and frankly they don't and shouldn't care about it. and that that's really created a whole thing around you know tokens and and and yeah um you know let's not go there but but I think that's one where it's still an issue I would say

is actually where I've seen the biggest issues on that is on the institutional side you'd be surprised by how much as you know if you want a bit of a more serious setup like custody and sort of compliant uh custody especially I think still very few companies are set up properly to to do it so Still two and a half, I'd say. Two and a half. Okay, thanks. This one is kind of related. Let's say technical on boarding barriers. Technical on boarding barriers. Yeah. Yeah. Yeah. It's kind of related. So maybe you've already uh Yeah. 50% answer. No, I think I I think this one is also a good one, right? It's it's um I think this one is a really good one.

Actually, I think this is probably a much let me rerate my previous answer. Um from the point of view of a builder, right? If I'm someone who wants to build a good application, I think now seed seed phrase management is basically zero on the issue because you can just use privy or one out of the box even one of these out of the box embedded wallet providers. The technical uh barrier to entry I think is still massive because I'll give you a simple example here. Um my sister um I'm actually at her place right now.

um she, you know, she has a bunch of of uh she has a bunch of ETH. She um needs liquidity. She's going to get married and she wants to borrow against her ETH. That sounds like a super good idea, right? And she has no idea how to do it. And so it's really hard. Like the point here is you have a sophisticated investor with a bunch of money in in Ethereum. Um it's uh it's on Revolute and she it's just it's not like it's too hard for her to do things. It's she doesn't even know where to start, right? This is not part of the mental universe of things you can do. You don't know which buttons to you don't know that there's a button for you to click somewhere right?

Um and uh yeah, this is someone who knows about morpho, knows about a but just you know the technical I mean limitations yes still still really really big. So I'd put it as as actually the biggest of five five as well. Okay thanks. Um this let's say this last one is kind of related as well because I mean we are actually talking about one core topic so they are all related in some ways. Let's say that um error handling is opaque. I mean the opakeness of error handling. Let's say you want to do a transaction. It doesn't it doesn't go through. You are not very well equipped to understand why and what to do next. Uh is that a big It's funny. I mean it's it's funny you

ask because I have so many illustrations that happened to me yesterday. Um to a Yeah, I think it's a massive issue. I mean it's it's like and it's funny because I think it's also totally under discussed one. So I think it's a really good one to to to bring up. Um we replace we're replacing all these financial systems with automated stuff. But that also means you know there's no one to call when when when when when problem happen. Um just yesterday very sophisticated friend been in crypto for you know years now probably 2017. It was was the first time he came trying to bridge money from um I think Solana to to base from Salana to Ethereum. No, based to Ethereum, you know, you'd expect like a super easy transaction was

rooted through a bridge I I I haven't heard about before. I don't remember it now, but yeah, it it took like 18 minutes and you go to this explorer page and you have no literally no ideas, right? You you see and and this is pretty good explorer page, by the way. It's like it looks nice. you see this this progress bar that says like confirmations, you know, you're stacking like you need 20,000 confirmations. You have no idea what's going on. I mean, this could have never arrived and, you know, he would have been screwed. So, yeah, I think it's a I think it's um it's a really big one. Okay. So, how much is it? Five and a half on five.

Yeah. Like the thing the reason why I don't want to say five or five and a half is like I think this is still so much on the outlier side of things that it's it's um it's I don't think it's an issue that most people encounter. This being said once again um I was preparing the session very thoroughly and I found uh one of the very old Vitalic posts I think from 2021 where he made this argument which I thought was an interesting argument that UX is not you know when you think about UX you should be thinking about in crypto UX in particular you shouldn't be thinking about the average case you should be thinking about the worst case scenario um and if that's the case well then you know it's a really bad score. Mhm. Yeah.

Perfect. All right so that's kind of done for me. when it comes to the let's say intro, the gamified intro, interactive intro. So, um please uh ask your burning questions right now to to look that's the whole idea and the whole concept of the VC office hours. So, just let's say raise your hand, pick up your microphone and just introduce yourself very briefly as Luke was asking before and ask your question. Try to be spot on. Don't spend too much time on on the context, but um let's make it spot on and interactive.

So, who wants to go first if everybody's shy? I have a couple questions. I'll I'll gladly go if that's fine for everyone. Yeah, please you go. Please go ahead. Uh so, first of all, thank you for setting up the call. Uh thank you, Luke, for coming as well. Uh I'm Yugo. I work with Ankor and we're building a new L1 called Neura with ME and OEV redistribution. Um and we're currently in talks with uh GFXU trade to basically um on have Morpho on our layer one and I was curious about your um if you had any advice on go to market for more on a new layer one with interesting yield redistribution.

Yeah, that's a good question. Um that's a good question. I think it's it's a great question because the the the what I would ask is like why why should they do the why should they do the integration like what's what's what's the reason why you think it's a compelling offer for them to to be considering. Um well first one is uh since we we will uh have a permission validator set uh we will be able to control ME and OEV and so we plan on incentivizing lending markets uh including morpho on this level. So I think increased yield for

users and protocols is definitely one of the main argument and do you have do you guys have a sense of how much yield that that would be? Um I could not tell you just like this right now because I think that's that that's probably the core of it, right? It's like either I think there's sort of three reasons why Morful would deploy on the chain in my opinion. Um one is because they have to uh there's so many users and that that you know the demand it's basically being pulled out of them in which case you know you just do it. Although Morpho has been very uh opinionated with regards to deployment and the amount of pool needed

was extremely high um from from what I've seen internally the first chain they deployed to was base and it was very strong reasons very sort of compelling reasons for them for them to do it that we you know learned about um after after they launched. So I think that's the first reason. The second is when there are a very obvious case um of you know you're going to get so much TVL that you know it's going to be make make a very meaningful dent in in in in the overall TVL number and I guess that's where we go back to how much incentives can you distribute because if you can distribute 10 million incentives is a very different story than if it's a 100 million or or you know a billion or whatever right

um and then the third reason is just commercial agreements, right? But but I think that is kind of ties together with with with the second one to be honest. So yeah, I would just make it super clear. I would have a very good sense of how much money is is going to be directed to incentives and to them specifically. To be honest, it might also be worth going through people like us. Um, and I mean kind of talking not with the uh with the the the VC uh hat here, but RE7 does a lot of liquidity provision with like a vault creator on Morpho on Uler and a bunch of others.

And like typically the way I mean what I've been seeing, right, I'm I'm not totally privy to this. Well, this is not what I do, but what I see is an easy way to go about this is to go to the curators and basically tell them, hey, we're willing to distribute X amounts through you. Uh, help us deploy this protocol on um on on our chain. Mhm. Makes sense. In which case, you should chat with you should chat with with the liquidity team and I'd be very happy to to make the intro if it's if it's not here already. We would love to.

And one question when you mention uh Moro deployment on the new chain do you mean front end or just contract deployment? Um okay both. And as far as I understand moro doesn't even deploy front end like the front end has to be taken care of by the Yeah. Yeah. We're we're in talks with Oku trade for the front end anyway. So this is taken care of. Yeah. Yeah. No, this is for the for the smart contract. Okay. Do you have a question related to the front end of um of your product to go that you want to ask to to look? We were mostly talking about let's say the agreement behind uh and the distribution but about the experience itself. You have already an idea of how you want to go about it.

Um I think more for front ends are quite straightforward but if you with experience uh with RA7 if you have any also advice on how to best include more either in the ecosystem for users or um with the front end I'm also very keen on learning more. Yeah. Well, actually I I turn it a little bit on its head for you and I would say when it comes to DeFi, a underappreciated uh UX consideration is for well people like us.

Um and I'll give you an example there. We're super active. We're providing a lot of liquidity on base, a lot of liquidity on Solano and obviously on Ethereum as well. It's night and day some of these ecosystems in terms of um it's not developer experience, it's not user experience, it's sort of defy experience, quote unquote, right? It's like, you know, um the stuff that matters to people that provide liquidity and do a lot of transactions. Um you know, if you can set yourself in a way that is, you know, the explorer is super easy to use and and the multi setups are easy to to do. Basically, think about UX from the perspective of liquidity providers. um basically I think would be would be an

interesting interesting angle because it's it's an overlooked one and at the end of the day they will make a big difference and and I expect their importance to to go sort of um increasing rather than than decreasing. Yeah, makes a lot of sense. Thanks a lot. Thanks Luke. Thanks Hugo for the question. Jamie, you wanted to go next, right? Are you still there? Oh, maybe it's left. All right. So, we come back to you, Jamie, afterwards. Uh, so who's next? Who would like to ask a question to Luke when it comes to uh to UX?

Oh, shy people. Okay. Can I ask a question then? Who? I want to ask a question. Oh, yeah. Yeah, yeah, I was looking at the doc. Yeah, please go ahead. Yeah, I want to I want to ask you guys like what's the what's uh any product you discovered recently? You know what? Maybe we I'll ask and then we can go um for for Jamie's question. But I'm curious, think about it then when when Jamie asks his question. But I'm curious if you guys have recently started using a crypto product that's become like a bit of a regular thing that that you use and and I'd love to hear what it is and and and what you like about it. Um recent being probably in the past like 12 months or so. But Jamie, you we remember you had a question. Um so if you want to if you

want to go ahead. I did. I was hiding I guess I was hiding there for a little while but I'm I'm back now. Um, it's not something I'm working on uh directly at the moment, but something I'm finding kind of interesting uh that I'd like to put to you and I think it feeds into the question you just asked there as well is this sort of broad umbrella of account abstraction and um you know sort of seeing a number of developments like um being able to provide natural language excuse me a wallet that's sort of powered by Jimmy sorry to interrupt you can you just like very briefly explain who you are what you are before getting into your question if you don't mind. Sorry to interrupt. Oh, sure. Sure. I've got I've got a few things. Yeah, sure. Um, I'm a longtime trader guy. I've been in this

space for about 5 years, mostly in the institutional grade crypto space, tokenization, RWAS, etc. Um, but I am sort of I guess part of the founding team of um, two early stage projects. One of them is sort of an AI powered stable coinbacked stable coin. um so stable coin backed by other coins or we've got sort of AI management of the collateral pool looking for yield optimization and sort of DPEG risk minimization. The other one is um completely different vertical um it's um sort of the AI evolution of brands um on chain. So we call it AIEL, blockchain.

Uh so the ABCs of brands, AI, blockchain powered and communitydriven. Um so think Hello Kitty, think Dora the Explorer, think Super Mario Brothers. Um we're starting with our own brand which is um a virtual music artist and users have the ability. The hook is basically smart um casual gaming and music. Uh the founder is sort of an old DJ, etc. So that's kind of an interesting one. maybe a different vertical and I'd love to pick that up with someone later on. Um, but my question is actually unrelated to all of that. So my question had more to do with account abstraction and some of the interesting things I'm seeing. I think you already mentioned the wallet that popped up on uh what was it the example

you gave earlier where 80,000 Farcaster. Yeah. Yeah. Yeah. Yeah. A Farcaster. Yeah. Yeah. So I think you've got something similar with Similacrim um on Twitter X. So you've, you know, everyone's basically got an embedded wallet on Twitter if you want to use it. It's um I think you just have to activate the similacrim I think it's called. And you can provide natural language instructions. So you can say, you know, what is my what what is my base balance? Can you bridge across to Salana? Can you do this? Can you do that? And you just sort of type it in and it it executes. Um yeah I'm and um it it kind of ties in with something I was looking at with you know some DeFi products and and bridging etc. Sometimes

bridging is a little bit beyond me. I'm not technical. Um but you've got Infinex sort of popping up. I think it's sort of um built by Kane the guy behind Synthetics where they're basically what's Yeah. Yep. Yeah. Kane Warick is it? Okay. Um, and he's building Infinex, which I guess is a sort of a browser based aggregation of D5 protocols where you can go in, I'm not sure if it's got natural language instructions or not, but basically you don't need to interact with the the underlying DAPs themselves.

You just do it via their web browser and sort of gives you this almost like a centralized exchange experience where you're dealing with underlying sort of DeFi. So, you know, between all those sort of little pieces there that are kind of related, account abstraction, doing away with some of the technicals, natural language instructions, and um I guess having that front end, I suppose you call it. Um I'm just wondering if that if that's an emergent thing for you or am I a little bit late to the game here or um you know, how do you position? No, I think it's I think it's I think it's um I mean look the way I see it it's uh it's um you know I think about those in in almost like design patterns, right? Um I think that design

pattern is fairly recent. The technology for it is probably a couple of years old now. Um it's been sort of in in in development very very um yeah super it was like the one big push for for Ethereum. Um and and and yeah, you see that design pattern. I think it's it's totally here to stay. Um I actually think if anything that we're still very early in the design space. I think most wallet experiences don't quite make sense. Um I think we we're in this like weird in between um like u UX in between, right, for for for wallets. um this idea that you have like this I don't know browser extension

that you open is it's just very clunky right I can't imagine us as an industry and as users settling on this as the as the you know global maximum in terms of how good the UI get the the the UI gets so um yeah I think that's that's the short answer um I think I think it's early I didn't really put a clear question to you. So sorry if I No, no. I think it's I think it's a really interesting theme, right? It's you know, I'll comment on on on the theme as well a little bit from my perspective, which is from the investor perspective because I think it's it's it's it's great like it it shows you I think that that it's a

difficult it's difficult from from our perspective because this is obviously something we've been sort of very alive to for the past like two and a half three years. But it's also like how do you invest in that, right? like you know it's going to happen, you know, it's sort of the the the general direction of things. Um but if you even if you knew sort of um you know a couple of years ago basically it was too late already, right? It's like privy was funded um infinex was funded. It's um yeah it's interesting um it's an interesting uh it's an interesting um thought thought exercise right to a be right on the thesis but also be right on the trade which I guess from our perspective is the investment from perspective of

founders is well you know their investment of time into a product and and an idea thanks Jamie for the question does it answer your your your question your broad question yeah you're fine yeah yeah yeah sort of just on the UX point I I think just just one last point. I I tried to open my similacum wallet on X on Twitter. Um but but of course I had to preund it with some with some base. I think I didn't actually have any base and then I realized how many steps I'd need to sort of get that in there. So I never actually got to play with it because I couldn't afford the gas. I couldn't find the gas fees. I think this is where Infinex comes up, you know, with a sponsored gas feed model where basically you you can bridge

across and do all this stuff on Yeah. um on SVM and EVM chains and all the gas is sponsored by Infinex for a fee. Yeah, I'm surprised I'm surprised you didn't bring that up, Raph, as a as a major UI UX pain. I think it's to me it's probably the biggest one. That's if if I have a five out of five 5.5 out of five, that that'd be the one. It's like you I just spun up an Infinex wallet, a new one in front of me, zero bucks in it. Okay, that's horrible experience, right? I have I have seven questions I want to ask you and I have like 20 questions from people who registered that I wanted to ask you as well and Gaz was one of them. So yeah. Okay. That's good. That's good. Um I see Ali you you unmuted yourself. I

presume that's for a question right? Oh me. Hi. Hi. How are you? I'm great. I'm great. Wonderful. Wonderful. I was actually enjoying uh listening to your story and actually your very broad information. I uh I had uh I I also sent the question uh in my uh registration and I wanted to see how do you see the actually the the UX for the health agents in the web 3 era will look like and how how do you see this transformation because like uh we we are developing a health AI agent ourselves.

We have a point related to that to call Dr. Pal and we are actually we've been working on it. So this actually UX UI UX both they have been uh one of our concerns and we are trying different ways to try to make sure that people are comfortable they're trusting it at the same time they're feeling safe when they're dealing with it. Meanwhile it has to be user friendly and all these things. I just wanted to know how do you see it? Yeah I think it's great. I mean a it's it's awesome product to see and and I love to hear more. be um I think controversial but in this case I actually don't think trust is the issue.

Um and I'm not even sure that being comfortable is the issue. I think people need to get value very fast out of the agent and if if you're able to provide this I think people are generally you know this like this idea of like stated preference between uh versus reveal preferences right like most people say they're super sensitive about health data and then you use ura ring and you have absolutely no idea where where that data is going but why use it because it you know you're getting a lot of value out of it or at least you think you're getting a lot of value which is even even more beautiful a business model. But um so I think that's the bigger the first thing I'd say is like if if I were in your shoes, I think the problem to to optimize for the

real hard thing to solve for is how can I deliver value super super fast with sort of minimal friction to the user. The second point, I'm kind of riffing out loud because you know your product has its specificities and I I don't know them and you're much deeper than I am. But one thing I think is that's very important and is a mistake that I think we see a lot when it comes to the AI stuff um is to make conversational interfaces and this is a little bit of a controversial sort of take but but I think conversational interfaces are um they're a failure mode of products um by which I mean they're basically the

lazy the option. Um, and and there's, you know, if you think about UX for a second, you know, the principle I would abide by is this this idea of like speed to value for the user and and minimal friction to the value. Um, and if you take that as the core principle, you realize very quickly that having people write stuff is a massive um, a friction and b that slows things down pretty significantly. Like the amount of time uh, it takes, you know, just Siri, right? the amount of time it takes you to open Siri and hey Siri what time is it in San Francisco versus you

know to click you click the weather app and you see what what what what it's it is you know it's like way way slower right so like the all of that say we see that error very often to opt for conversational interfaces with AI when in many cases it's it's there's way better things I'll give you a simple one simple example here that I would take a lot of inspiration from I I mean even happy to show my screen but but the you know one thing I' I'd offer is one alternative is uh reports like these agents are insane at building reports you put in data get in data continuously but once a day or twice a day or once a

week probably better once or twice a day you you give me a report not even maybe numbers but it's like hey here's what's going on here's what you need to know um a little did like I know I'm sure many of you played video games you know people that like strategy video games they love to to handle their business like a video game right like like civilization or like Rome Total War where you get these daily reports and then you need to take actions you know um based on on what came in it's like hey you know the queen of of this country just made an in alliance with you know the helvetic confederation and you know how are you going to react to this type of stuff I think that's a great UI for agents and and it's one that's been extreme extremely in my

opinion under underexplored and and something that for health I think would would make a ton of sense. No. So you so you basically what you're saying is that uh things so basically you're saying we have to move on from the chat bots in general. I think we will. I think it's I don't think it's like we have to. I think it's like market force will will make it so that that we move away from this interface at least for many use cases. Not for all, right? There'll still be a couple where where it makes sense, but but generally, yeah, I think we're we're well where, you know, this is more and more the the direction of of flight in my opinion.

So even if with the ones with the speech recognition and the one which are giving you the ability of actually conversation um let me let me put it differently basically I once again I don't know your product but I presume that what is hard in what you do isn't to give the agent the ability to chat with me that's easy anyone can do it you know I can probably spin up a chatbot now in 35 seconds what is hard is how you end all the data what is hard is is what you make of the data. What is hard is the specific prompting that you use to find insight in the data and my contention and and right once again this is I think this is not even

advice because I don't know your company so I can't advise it but my hypothesis is there are more efficient ways than purely conversational interface to surface this information to users and then maybe if they have additional questions if they want to know more you know maybe they can you can have that option somewhere but my I suspect they actually don't want to chat with some something else. Thanks. Interesting interesting point of view. You have a follow-up question Ali or maybe we can move on to Alexi who apparently has something to ask to look right. Yeah, thank you. Um yeah, hi Luke, nice to meet you. I'm I'm Alexi.

I'm a adviser to companies in the fintech free who seek to raise capital. I've been a a VC fintech investor prior to that in my career uh briefly based in Tuk. Um question for you. It's um a bit of a debate right as to uh come to liquid token strategies. How much of it is linked to market dynamics discounts provided to early backers? Yeah, real kind of topline growth though I come from the trfy world. So for me, no customer experience generates more customer in terms of volume, more more volume of activity and therefore more revenue growth, right?

Yeah. So how do how do you guys when you when you invest into something assess know the investability from a customer experience perspective? How do you assess returns for example? And when you say custom experience, what do you mean? You mean like the the like the actual user experience like how good the product is or or am I reading too much into this? Yeah. Yeah. Yeah. Know so you do your memo right? Yeah. How do how do you guys say this is quality therefore it's topline growth there? So it's bottom line growth. So it's returns for me. Yeah. Yeah. It's a great question and uh I think a lot more people should ask themselves these questions uh in in in in this industry.

I mean, let me preface it by by addressing kind of the point you were making around sort of the the general market, right? There's multiple ways to play the the venture game in in crypto. Um, and you know, in in in in some funds cases, the the game is is um is a I would say shorter term game where you understand there is a liquid market. you have some sense of of how this liquid market behaves and you have some sense of of how to package um financial assets um in a way that that will resonate with it. And so these funds are it's not just momentum traders. They're almost like um asset creators to some extent, right?

They they create the the the momentum um and and and benefit from it. Um our is very different. Um so we we um we operate from the belief that there is a new technology um and a new computing platform and that this this sort of technology shift coincides very luckily with with a consumer value shift in terms of what people want to do on the internet, how they consume information, the type of stuff they want to see. Um it's a bit vague but but but you know that that's still that space um of of vagueness right where you don't exactly know what's going to emerge but you know something is about to emerge is is where generational companies are are built

right so then the question is okay what what are the traits of these companies once again if it was programmatic I think um my job would be a lot easier our underwriting at this at the stage we're invested is very largely premised on on the teams, right? So, it's it's that's probably most of the underwriting and the thinking and and the and and and you know, the time that goes into um making these investments is, you know, mostly relationship building and just getting a sense of of who people are. I like to say, you know, the due diligence we do and the memo we do is the last 10% of the job, right? like the 90% they are

the you know we're we're we're we're closing um our first investments now from from this fund both founders I've been personally working with um for over a year now and so you know the memo and the the the diligence it's like you know we we add a level of formality to it but the work's been done already right so that's that's the first component now on the specific um uh question that you asked which is how do we underrite And how do we think about the product itself? It's it's a it's an interesting and hard question. I think there's um there's there's two two two answers here. The first is we're more

interested by the unique insights that these founders have on which they're building their product. Um usually the stage we invest at the product end up being very different than than what they started out to be that set out to be. But what doesn't change um from my experience is the way founders think about building a product. And so what we check I think and what we like to get confidence on is less um you know do I think this product makes sense and more how do we get to this product? What is the core inside?

What is the founder seeing? Is he seeing or is she seeing something that is true about the world? Um, you know, kind of true and unnoticed type of, you know, unobvious truth type of type of stuff. or is this someone who is building you know um I mean I'm sure you've you've seen many many founders like this that I think whenever you ask yourself wouldn't it be cool if usually that means this is not a great company idea or you're not the person to build it this is very rarely how you know these things happen right um and so yeah I think that's my answer to your question I think the the product itself and like the kicking around and where the buttons are and the UX

I treat we treat as a symptom to something that is much more important to us and that is how the founder you know is this a quality founder that that you know can think clearly about um about their product and about the world. Sure. Thank you. Yeah know that I I think I was following the same approach as you the product found the fit right like SEOA puts it or then it is about the funny feature you know I believe the features can always be improved right at the end of the day get the right people to put something great together if there's like one thing business school taught me I don't know if you went you know if if any of you went to

business school I'm sure many did um the one thing that it taught me was that you know put a bad team together with the best idea possible in the world and find a way to it up and you put a great team together um they will find a way to make a bad idea into a good one and and and execute well. So yeah 100%. Thanks for the question Alex and the answer. Maybe we will go back a bit more into UX mode which is the topic of the day. We went a bit larger which is uh which was interesting because we we we got your perspective Luke. Um actually we got some questions from a few people who didn't manage to connect now but ask the question in the form. I'm trying live to aggregate those questions that overlap a bit. Basically what they're

asking is um do we see what types of key metrics and KPIs can we uh port from web 2 to web 3 and what are new KPIs and metrics to um to assess whether the UX is good or bad for web 3 product. So for instance talking about the UX you could think about the UI where uh you would like test buttons colors blah blah blah etc. you would get some heat maps to see how people are moving uh the mouse etc. Um, so those are basic UI uh stuff that you you you would assess that may be likely portable to a web 3 interface.

But what they are asking you is what types of new KPIs specific to web 3 uh could complement those web two KPIs that we would be uh porting from from web two to web three. That's a great question. Um, it's a great question. I think these metric conversation are also really hard to have out of context in my opinion. Um the one KPI that I would always be extremely um where I am personally very um alive to and and and want to see good is uh user retention. That's the most important thing. And then there's like a variety

of way you can measure that. You know I I think simple is good here. um you know the simple stuff like DAU to MAU ratios um or just simply quart analysis you know uh first week of the month someone joins are they still there at the end of the month yes no right and then you get a a percentage you get your churn and and retention rate and you know these things they're super simple they're very easy to count um they're table stakes in web two they're not in web three actually we never speak about them in web 3. Um you'd be surprised like all you know founders when they have traction it's always user numbers that's

what you get you get user number you have like 1 million 1 million user 1 million accounts created which is mental actually you know now that I realize I should be a lot more I think opinionated about about that being a really terrible measure um so that's the one the first part of question that's the one I would I would pick anything related to retention and honestly you can pretty much safely ignore everything else uh until you've solved that in my opinion. the the second one which is web three specific two parts uh two answers there um the first is general the second specific the general one is to me what's unique about web 3 is is less decentralization less cyber punk I mean all that is important and great and I

think it got a lot of people in from a purely product and business model perspective what is unique is just finance rails that are interwoven with information rails um and the ability to do minuscule transaction and you can pay you know a ten of a cent and you know that kind of makes sense economically and it's the only place where it makes sense economically um and you have this programmability that makes it so that you can sort of engineer business models um in in a very different way. The point though is so you have this um money and information type of technology. So how about you make money?

Um and that's like the second so that's like the to me the second big metric and and in reality I think the more things go the more this is the only metric that makes um sense to look at is just money made. Um you know I I give you an illustration here. one ecosystem. Are any of you guys familiar with Ronin and the Ronin ecosystem? Like are you users? Are you like, you know, have you played any of these games? I'm not a user, but uh who's using playing those games? Who is in this ecosystem? No. Well, is anyone Yeah, it doesn't seem like anyone is uh

is uh is uh is on there. Well, doesn't matter. These guys are printing, you know, there's a bunch of games that are making tens of million in revenue. So that's interesting like what's going on here. Um I think this is the type of stuff that pricks my my my interest because you know I know social I I know so I know Farcaster sort of inside and out. That's like the probably the ecosystem I know I know the best and the most and the data and like how many users real users fake users. I have a very good sense of that and so whenever I see you know product tell me like we have a million users um I have also a good sense of of the comps and the reality is all these numbers become increasingly meaningless because you don't know what's driving them you don't

know if it's real users you don't know where these users come from you don't know if these users are you know high paying users versus lowpaying users and um so yeah just revenue I think increasingly is like the one thing that um is really hard to game because people are giving you money and so that's the one thing I would track more in web three and the second part of the answer the second leg here is on the KPIs in web 3 is I think this is precisely what we have to invent and I think this is how we win in web 3 is by coming up with these new KPIs uh because that means we have found new business models and you know that's the the the clanker I don't know if you guys

are familiar with clanker it's a token launcher on base um it's It's a very interesting and and successful product. They they've launched a bunch of tokens that that went to really high valuations, which is kind of what you you you you want from a token launcher. And what's really interesting is they have this economic model where the token creators, which can be memecoin creators, but very often are actually also real uh companies behind them. The way they monetize is through trading fee. And so suddenly you have this company that um has this new KPI which is um trading fee gotten from the trading volume which um is directly linked to attention. And so that KPI of trading volume is super important. Then it's one that doesn't exist in web two exists in web 3. And because you have

this like small uh trading fee capture and distribution to the creator, it's a massively significant number. And in the case of Clanker, by the way, it's made 9 million, right? Since no, more more a lot more. Yeah. 25 million total um since launching in in November. Uh and then this is split. Maybe the 9 million comes from there because this is then split between creators and and the protocol. Yeah, very clear. Thanks for for the clarification and for the the illustration. Uh Jonas, you had a question that you mentioned in the form. Maybe you want to ask it live and maybe you you forgot it, but if you still have it in mind, please take the mic and ask your questions. Otherwise, I have it in front of me. So, please feel free, Jonas, if you're here. Yeah. Do do you

hear me? Yeah. Loud and clear. Okay. Nice. So nice to meet you guys. So just to introduce me, I'm Jonas. I'm 27 living in Switzerland and I'm currently working with a gaming project and advising uh an AI one. uh been into web three for like four to five years and yeah the my question was about uh do you think or what's your point on uh especially within the the the gaming ecosystem where uh we already know that the the acquisition is pretty hard when it comes to web two players and the

situation we are quite facing uh in my company because we we had some some traction uh in the traditional fields and it's like should should we try to in a sense teach them uh what is web tree and yeah really create uh funnels to to teach them more web tree or should we as we know it it clearly doesn't really make sense in my opinion to do so but really to get through UIX and UI toract totally the the web tree part and just making it works without them even knowing knowing they are using

blockchain and stuff like this and here we are taking the context of gaming right because maybe will be different for another type of sure sure yeah yeah I like the question a lot um so basically question is like do we do we do we hide do you hide that we're uh do we stay in the closet that this is a crypto project or or um or are we so do we lean into that? Um I think the answer is is is both to be honest. Um I think both both can work both can work very well. I I have to say I am more excited by um games that lean it's it's hard honestly it's hard it's it's it's hard

to say but I'm really excited on on on games that that lean very heavily into blockchain actually um I think it's a mistake to or or put it differently not necessarily mistake but I think it's really difficult to build stuff that is very similar to web two with with um with um with crypto rails on top. I think you know um we have a very unique set of infrastructure pieces. Let's let's use them to the maximum. Let's kind of push at the limit, right? So I mean there was this one game for instance that that I that I think was a brilliant experiment that I made a lot of money as well um revenue and I think

in a way that it was very I liked it because it wasn't grifty at all. Um it was this this game called world PvP. I don't know if you remember it. It was um it was created probably like a year ago now maybe a bit less like six eight months ago when when there was this like country meta and trading in in the trenches. So you know people were trading these tokens you know the Swiss token French token there this like country trading meta for like 48 hours probably. Um, and it gave these founders this idea of building a game where each country had a token which you could buy. Um, and after there was a bunch of epochs, right? I think every day or

every few hours. And by the way, I I by by the mechanism was that at the end of each uh epoch, you the the country with the highest uh token valuation would then be able to nuke one country and take their treasury. Um and it was great. Like people love this game and these guys made like I don't know 2 million just from trading fees in in in 14 days or 15 days. and and I was like I think that was brilliant. It's it leaned totally into crypto. Like it's like as cryptonative as it gets.

Um and it's probably one of the funniest game that that that crypto's created to be honest. Like the rest, you know, I don't think the rest has been particularly funny to play for for for uh for anyone just yet. So um sorry it's a bit of a mumbo jumbo. I'm I'm thinking out loud. Two two two core uh blocks to my thinking here. One is I think you can succeed in in doing both. Although I I like the very cryptonative um gaming approach. Crypto the game is another great example in my opinion. The second is um maybe sorry to to step in but maybe there's also like a consideration to have as to whether it is casual, hyper

casual and maybe here the answer will be different. Yeah, that's a good that's a good uh that's a good um nuance. The second piece I would say is like just make it fun, right? And it's like that's the part that's that's super hard. I think you can make a fun game that's outside of crypto, although I think it's harder because the competition is really hard. I think you can make insanely fun games in crypto and there's just not not a lot of creativity going on. Um we have like one or two more minutes uh for one last question. Uh has everyone or anyone sorry like a burning last question to ask to Luke? Um maybe can I just uh go further with with one question? Yeah, because basically uh I I I think I do agree with you when it's it

cames to really lean into web three stuff. then shouldn't we uh make the difference between between the the different acquisition canals finels when it come because I I I can get uh some ways to do it when we truly speak to web three already users and stuff like this to really lean on on web three tech and stuff like this but when it's also uh we know that our user base in our case for for example is really more traditional and casual uh I I I view it really more difficult to to really lean uh into web three wi without having some some stuff like this. What do you think about the the acquisition if we should

really split both or try to merge them or is it really because I do believe that if we manage to have a great UIX and UI especially UI we will then manage to to merge both and and really speak to to both uh ecosystem. Yeah, I think that's the part that's hard. I think you kind of have to pick your lane. Um, and um, let me ask you a question actually because I think it's going to be important. Like why why do you guys have any web 3 component to this at all? I mean it sounds like you're not targeting web three people like is web 3 an important part here or is it like just here for legacy reasons?

So basically it is because web three uh was the best solution we we had to to just counter the the problems we we had when it cames to uh uh we had especially logist logistical problem because we we had to send gift and stuff like this uh when the the user base was mostly in India African stuff like this where people didn't really have addresses uh and it was really costly And then also because uh based in Switzerland we we can't uh just send money like and stuff like this. So to to give value uh token and crypto was the easiest and best way

to to do so. But a followup here, do you do you have to give money for people to want to play your game? Uh I mean uh yeah because it is part of uh of our game if you want. It's a a treasure hunt where you just have to to go outside do quest uh and then be reward for for this. Uh when we were fully traditional it was like uh with uh with PlayStation you can you could win bike and stuff like this. So this is this is the base of our game. Just give value for people that want to to do

quest and go outside and have fun in a in a gamified way. Okay. Yeah. Well, I mean it sounds like Yeah, it it sounds like it sounds like web 3 is is for you guys not a a core part of the of the game play, right? It feels like it's u it's almost like the payment of structure that you guys use. Um, and so I think with that in mind, I would totally abstract it away, right? I would make it a super nice simple UI embedded wallet. People don't have to think about that and they receive USDC. I have to make it easier easy for them to to cash it out. Sure.

Um, but but yeah, it doesn't sound like you need to push it on them, right? Yeah. Yeah. Totally agree. Totally agree. Then we we also just maybe to explain a bit further, we also we have to to say thanks to L because we are sure we we we wanted to add special uh web component like uh gamification and socialify because we think that there is a lot to do uh as as actually uh social and things like this are are really boring in my opinion. So yeah, wanted to gamify it and also giving us more reason to to go deeper in web three. But yeah, maybe then I turn on what you said before that

we just have to to split both and really go one way then afterward maybe thinking about developing another. Yeah. Or just doubling down on on the one that works, right? Sure. Super. Thanks Janess for the context and and the questions. Um I have the impression that Jimmy you want to ask a question to Luke but maybe you can uh directly uh talk to Luke afterwards either using the Farcaster platform or any other means of interaction that that that could be a good means you know to to on board a new user on Farcaster ask question to look you know yeah yeah um not the best use case of our caster but it's one use case it's a growing use case from

thanks so much Luke for being here for being um authentic and open to answering many different types of questions. Uh you can um yeah, you can follow Luke on Fcastaster. So he's Yeah, that's the best place to find me. Exactly. Warpcast.com/luke lu and you know just just hit me up with a DM. I'd be happy to to answer you. Yeah, I just want to pre-announce that on June the 12th we will have VC office hours number three with Elanor Paradigm with Elanor from Fabric. She's based in London and she's the head of the platform at at fabric in London. So she talk about marketing tactics and strategies including event strategy.

Unfortunately, it will be like two weeks after uh token 2049 where a lot of startups may be willing to you know sponsor some events or do some gigs over there. So it will happen afterwards but we know that the web three industry is let's say plagued by events. We have too many events. So I mean you you will have this opportunity to implement what she will be advising to you uh next month. So Elenov from fabric head of platform topic marketing strategies and tactics and event strategy. So thanks again Luke. Thanks again everyone for being here today. was slightly over time, but I think it was a very interesting