We evaluate startup companies as complex, adaptive systems on a case by case basis. At the same time we developed a thesis to articulate what we care about most and where we see outsized opportunities for entrepreneurs. It serves us as a high level framework of thought, hence it is not supposed to narrow our exposure to any specific industries or technologies. As societal and technological inflection points continue to form, so does our thesis.
We believe that the cov19 crisis will continue to accelerate fundamental trends in geopolitics, economics and technology that we intend to capture.
Inflection invests into open platforms that empower users and upgrade capitalism.
Platforms are ecosystems that bring together multiple stakeholders to do business and co-operate. The value they create is bigger than the sum of their parts. Google, Facebook, AirBnB or Apple are platforms but they are closed and proprietary, not open. After having reached maturity they started to exploit the market they are orchestrating - by directly competing with the supply side and by charging monopoly fees on the demand side. Value and governance rights accrue to a comparatively small circle of shareholders while employees and most importantly - users, who often are the main value drivers - are mostly excluded from economic participation.
Open source ecosystems underpinned by programmatic incentives provide a breakthrough alternative. Napster and Tor explored the first peer to peer applications, and in doing so, coordinated and distributed resources over the internet. Ten years later, Bitcoin added programmatic incentives on top of that coordination logic. The convergence of distributed resource coordination and programmatic incentives enables a new breed of internet native organizations that are not companies - stakeholder owned networks. They are funded, created, used, maintained - and owned - by a pool of distributed talent and resource providers. They are more economically efficient and monopoly resistant than any corporation ever could be. Ownership driven network effects make them scale faster and more sustainably than corporations. Early use cases go far beyond cryptocurrency and finance. For instance, Radicle is building an open platform for code collaboration which rewards open source contributors and maintainers programmatically. Anytype is a user owned, open source operating system providing alternatives to Android and iOS. Relevant is exploring new paths for incentivised, human content curation to combat misinformation and fake news on social media.
The web has been perverted through it's client-server architecture combined with advertising centric business models. A closely knit system of surveillance technologies is tracking everything we do to predict and manipulate our collective behavior. We lost our privacy as a fundamental human right. We are addicted to our devices with severe consequences for our mental health, our relationships and our ability to independently develop a sense of truth. Ultimately, our lack of intellectual sovereignty is undermining open societies and the democratic process.
All of these challenges represent gigantic opportunities for entrepreneurs to create alternatives. We believe that the time is ripe to fundamentally rethink the web's architecture including its incentive structures. A whole new stack of freedom technologies is required to let the web live up to its potential by protecting user privacy and breaking open data silos for the benefit of humanity. For example, Foundation is building open source, auditable consumer hardware allowing any third party to write native applications atop of it. 3box is setting a privacy preserving ID standard while Matrix protects individuals and corporations from surveillance and data breaches.
Our financial system is built on 20th century technology and 18th century governance systems. Both are inefficient due to overbearing bureaucracy and corruption. Financial assets are represented digitally but cannot flow smoothly across the globe, just like emails can today. Instead they are stuck in highly fragmented jurisdictions limiting access and economic activity. Excessive quantitative easing and interest rate manipulation are further eroding the value of fiat moneys around the globe while systematically increasing wealth inequality.
Software has been eating the world and is now coming for the public sector - starting with money itself. We believe that a vastly superior financial system is indispensable to address humanity’s global challenges. The 21st century financial system will be made of software. It will be accessible for everyone, less prone to fraud and orders of magnitude more functional than the legacy one. Built on open source code and composable building blocks it allows for deep economic and financial innovation. One example is Balancer which empowers anyone with an internet connection to create self balancing ETFs and earn trading fees from their pooled liquidity. With Centrifuge and Maker programmatic loans can be drawn against any digital representation of value like invoices or cryptocurrency holdings - instantly, 24/7 and without intermediaries. Aragon offers software enabled governance templates and court systems to govern the public commercial infrastructure of the future.
Many of our recent investments fit into this thesis and we're excited about using it as a guide to shape our future portfolio.