New a16z Crypto Research Lab Bridges VC and Academia
Hello and welcome to Pipeline! This week: Inside a16z’s crypto research strategy, avoiding the “winner’s curse” and understanding Web3’s protocol wars.
The first step of everything
Andreessen Horowitz’s decision to create a research lab is part of the trend for investors to act earlier and earlier in the life cycle of technology. Why wait for a startup to form when you can invent what makes that startup possible?
The old pattern of large quasi-university research arms within corporations has generally faded – and even with a16z’s resources, it would be hard to see how it could fund something like this. Instead, he models the a16z Crypto Research Lab on new approaches like OpenAI and Alphabet’s DeepMind, with the goal of building open-source software and publishing discoveries that address tough challenges in the crypto industry.
Some VCs consider research-driven startups to be “science projects.” That’s not how a16z sees things.
- The modern technology industry has its origins in solving difficult technical problems like the semiconductor. In recent times, venture capitalists have generally been less interested in funding academic research, instead waiting to invest until an idea has a clear commercial use and outcome. But things have changed.
The business landscape, especially in the crypto realm, is more competitive than ever. Companies raise billions and there isn’t always enough capital to win a deal.
- Venture capitalists have tried to invest earlier in the development of a startup: by incubating startups, setting up studios, and even funding founders with just an idea.
- Academic research is different. It’s about tackling larger, industry-wide problems, often before there’s commercial use of the solution. But innovators tend to find ways to use them. Bell Labs is where the transistor emerged, and SRI has given us everything from mice to Siri.
- Andreessen Horowitz distinguished itself with an integrated service arm, providing assistance with everything from product design to recruiting. While other companies copy this approach, having your own research lab helps set it apart. The research lab will help a16z portfolio companies with relevant research, but more generally it could give the company a halo effect in the eyes of the founders.
There’s also the reality that Web3 and cryptography are so highly technical that extensive academic research makes sense. Unlike, say, semiconductors or networking technology, academia has barely had a chance to delve into all of the intricacies of blockchain.
- It is not unprecedented. Other companies focused on highly technical sectors have partnered with academics. Lux Capital has had a scientist in residence, and many of its companies work in technical fields and deal with academic disciplines, said Bilal Zuberi, a partner at Lux.
- “Creating in-house capabilities to connect leading researchers, fostering futuristic visions while rooting deeply in science, and linking publications and patents to business narratives emerges as a key role for early investors,” Zuberi said. “So I’m not surprised if more companies are following in our footsteps and building larger in-house research and research support organizations.”
- Other crypto backers are putting effort into deep research. Paradigm, founded by former Sequoia partner Matt Huang and Coinbase co-founder Fred Ehrsam, has a large research team and engineers working on big crypto challenges that resemble what the team at a16z wants to solve.
It’s increasingly clear that crypto startups simply can’t solve important problems like consensus mechanisms, Layer 2 scaling, or next-gen NFT markets on their own, argues Ali Yahya from a16z. This calls for experimentation. Perhaps the ultimate science project here is to find out what the future VC-supported research lab looks like.
Sheel Mohnot has a new term for VC herd tracking behavior: “VERY common in this market: VCs wait for another signal and/or try to get a deal. There’s a term for that: SHITS. Show high interest, then quit.
People are still moving to Miami, “Chaos Apes” author Antonio Garcia Martinez reports: “A guy just walked into this Venezuelan cafe in Brickell wearing a Y Combinator MAKE SOMETHING PEOPLE WANT shirt. I’m calling for a total and complete halt to California immigration in Miami until we figure out what’s going on happens.
Jeff Richard “open source” an internal discussion at GGV: “’It’s going to be a very difficult year. Undoubtedly the most difficult year since the [Great Financial Crisis]. Markets, geopolitical uncertainty, end/not end of the pandemic, elections, etc.’ Maybe wrong. But many intelligent animals [are] to protect. »
A MESSAGE FROM PwC
Mergers and acquisitions and workforce reorganization can create a wealth of opportunities for companies seeking rapid growth, transformation and market expansion. In fact, 47% of executives say continued business mergers and acquisitions, joint ventures, and alliances are their top growth drivers in 2022. Unfortunately, nearly half of executives say acquisition and Talent retention is the biggest hurdle.
Paul Griffiths broke up Jared Kushner’s private equity fund launch platform.
Much like past battles over technical standards, there will be winners in the Web3 protocol wars, says Tomasz Tunguz.
VCs can avoid the “winner’s curse” and make better decisions, Don Moore and Max Bazerman write in the Harvard Business Review
Plaid co-founder William Hockey, who left Plaid as CTO in 2019, started a fintech-focused bank called Column. He had previously bought the small bank for $50 million and “refurbished its operating systems.”
Stage is a new company that buys out Series A startups where growth has stalled. Other companies like Xenon Ventures are also doing this.
Venture capital funding fell in the first quarter of 2022. A decline in deals of more than $100 million, driven by public markets, weighed on industry figures.
From the protocol: Intel calls its AI that detects students’ emotions an educational tool. Others call it “morally wrong”.
Your reading of the weekend: For mRNA, COVID-19 vaccines are just the start. HIV, Zika and many more are in the works.
A MESSAGE FROM PwC
ProEdge can help you perform a skills gap analysis in your organization and gain insights you can leverage to develop forward-looking plans while considering the needs of the entire business, including individuals, teams and functions. In an M&A scenario, a development program like ProEdge can also be used to uncover employee skills that were previously unused.
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