Hello Defiers! In this week’s interview, I spoke with Gavin McDermott. He’s an investor at IDEO CoLab Ventures, the venture arm of design firm IDEO, and he’s one of the creators of Fair Launch Capital. While the name might suggest otherwise, Fair Launch Capital isn’t an investment firm, or at least it’s not a traditional investment firm. Instead, it gives startups no-strings-attached funding so that they can afford security audits and launch their projects in a safe way. They’re asked to consider paying it forward by returning at least the same amount they got but ideally more, to fund the next project.
The idea came after the team saw that many founders in crypto were feeling forced to either sell tokens before their platform launched or raise venture capital as one option to pay for audits, or release their projects without the proper security checks. Gavin is hoping fair launch capital provides a viable alternative to venture capital, even if it does end up disrupting his fund’s own business model. Since the group unveiled this new funding mechanism late august, the term “fair launch” has taken a life of its own, becoming a gold standard for any new DeFi venture.
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? Together with Zerion, a simple interface to access and use decentralized finance, Perpetual Protocol, which provides decentralized perpetual contracts for any asset, and HackAtom V, a two-week virtual hackathon organized by Cosmos.
Gavin McDermott: Long time ago, I was in finance, and I was looking for a way to improve just the general system state, so when Bitcoin happened, that made a lot of sense. Ended up moving to San Francisco in 2012, it’s where I met Mike Belshe and I was the first engineer hire there, so I ended up going to BitGo with Mike and the team for a few years. As Ethereum and things were kind of happening, IDEO — it’s one of the world’s best design firms, let’s put it like that. After having seen what amazing engineers can do with design, I thought it’d be a great place to go see what the world’s best designers could bring into crypto. I’ve been there since and it’s provided really fruitful soil for exploring that.
“After having seen what amazing engineers can do without design, I thought it’d be a great place to go see what the world’s best designers could bring into crypto.”
Camila Russo: Oh, that’s interesting that you got into crypto from kind of a design perspective.
GM: I love the engineering side of things, but engineering is only part of the equation. You understand this as well with the way you write and the way you story-tell, you need storytelling and narrative and design to be able to bring these abstruse things into the public domain so that more people can use them. Without that, it just kind of ends up as this esoteric thing that you just talk about, and very few people use.
CR: From when have you been investing in IDEO?
GM: We started the fund a little over two years ago, and we’re IDEO’s first venture fund in this space. We started investing… it was kind of a side effect, we’ve always been really hands-on builders and that’s kind of where we all come from. We had this lab where we got really hands-on in the early days. I mean, we knew the team at OpenZeppelin, before it was OpenZeppelin and back when they were at Streamium, so we’re working with them, we’d worked on the first version of Augur’s interface with Joey and their first team.
Basically, throughout the years, we’ve been working with these really amazing founders and projects, and a lot of the times they’d asked us to write checks, and we didn’t have any capability of doing that. The fund was kind of a side effect of all the hands-on work we’ve been doing, because, effectively that was our talent was bringing design into the space. So being able to speak both design and engineering, it was like, well, we’ve got a real ability to get involved early and not just write a check. That was kind of the thesis behind the fund was, let’s add a lot more than just money, because if capital is a commodity, we need to be able to do a lot more. Again, IDEO was a really great ground for that.
CR: Oh, that’s interesting. So what you do is you help out projects with their different design decisions, and I guess, how you help them actually build the product and also invest in these projects as well?
GM: We’ve been extremely hands-on. We’ve been heavily involved in the economic design side. We did a lot of interesting things, we did some projects like Futureswap kind of earlier in the year. Then on like the product design, and in the hands-on brand design, narrative and storytelling like we were talking about, we’ve got the world’s best people involved at IDEO, and to bring them to bear with some of the projects that we work on is a lot of fun. That’s kind of the blend that we have. Is like I said, I think capital is kind of a commodity, and so we’re looking at how do we do more for these teams, because we all love this space. We’re kind of talking about, like Fair Launch Capital and some of the things that we believe in, we just need to bring a little bit more than speculation.
CR: At BitGo, you started out in the Bitcoin side of things, but the investments that you’ve mentioned are more on Ethereum. How does that work at IDEO? Is it coincidence or have you focused on Ethereum? Or is that thought out decision?
BTC vs ETH
GM: Strong belief in both, we’re invested in both. I believe that both are crucial for the way this movement is going, and they both have completely different roles to play. I believe in both. Let’s all put it that way.
But Ethereum is where we’ve tended to go and where we have seen a little bit more fast-paced in terms of what we can do and how we can iterate on evolving things. Because there has been just a little bit more activity there, so that’s where we found ourselves being a little bit more hands-on today.
CR: Makes sense. That brings us to DeFi because obviously, that’s the sector that has seen so much activity on Ethereum recently, and the sector that compelled you, I guess to create this Fair Launch Capital idea. What was happening in DeFi that kind of compelled you to create this? If you can explain what Fair Launch Capital is?
Games of Human Coordination
GM: What’s been happening in DeFi, I think is just amazing, in terms of the quality of people, and the quality of ideas, and there’s plenty of noise. You’re always going to find a lot of BS wherever something interesting is happening, so being able to parse that. But underneath when you kind of get down under the noise, there’s a lot of primitives and behaviors and possibility that is starting to emerge that you have to pay attention to it and it was like that. Yeah, it’s absurdly interesting.
A lot of the mechanics that are developing are enabling behaviors for coordination, and new types of collective coordination that we didn’t have two years ago. It sparked with honestly, Synthetix, the incentivized pool on Uniswap and seeing how you could coordinate behaviors to support that underlying protocol in a different domain. That was like one of the first fire starter moment.
We’ve been watching all these mechanisms evolve over the last period of time, and with every little step, you wind up with these new possibilities for human coordination. That’s honestly what it is. For me, these are games of human coordination, and so through that lens, you can kind of set aside a lot of the noise and start understanding what do we really have here.
“… these are games of human coordination, and so through that lens, you can kind of set aside a lot of the noise and start understanding what do we really have here.”
Then what emerged from that, when we saw when YFI hit the scene, kind of made me pause, and just kind of take a look at what had happened and what we’re starting to form on the side. Let’s just like put a pin in that and say, that’s one data point on the landscape.
Another data point, I’ve been in conversations with founders, there’s one guy was talking to in particular, and I was asking, really, why you’re raising money? What are you raising funds for? The answer was, well, to get an audit and to take care of some of these basic things.
We got to talking like, well, if there’s a place you could go that can take care of that first audit and things like that, would you pursue a launch with similar principles to just a type of —let’s say, Fair Launch because we’re still learning what that is and what it means and how to do those things like the economic tools, the mechanisms, those are still being created, like in the vault that’s being written right now. But anyway, so it was like, would you pursue a Fair Launch if that was the case? His answer was, well, that’d be great. There’s just now here to do that right now.
That was like the fire starter of okay, so it’s like, for every founder that wants to go raise traditional capital, there’s, I’m guessing a handful of founders that would be interested in pursuing a different model. That’s not saying that unequivocally a Fair Launch or the Fair Launch dynamics are better than going and raising VC funding or anything like that. I think there’s room for both, but it is optionality and it is a new design surface that we have to work with, speaking of design.
As soon as we ran that by a few founders of like, if we just had this as a potential, what would you do with it? There was a lot of resonance and I listen to resonance. It’s the nature of things. When something resonates, there’s usually a connection, and there was a lot of connection. So that’s how we got to talking with Reuben and Joe about okay, what do we need to actually make this thing a reality?
That was the fire starter for it. But that’s also like, all that was birthed from all the collective movement and churning within DeFi and the behaviors that enabled governance and all the behaviors that are starting to emerge. So again, this stuff just wasn’t possible 18 months ago based on how communities coalesced at that point in time, but today, we have kind of a confluence of factors that makes it possible.
Image source: www.fairlaunch.capital
CR: So can you go deeper into what those factors are that led to this moment?
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Paid subscribers have access to the full transcript, including sections on:
- The rise in protocols and governance
- Mechanics of the fair launch
- Enabling symbiotic and not parasitic protocols
- What’s unforkable
- Building healthier communities
- IDEO’s DeFi residency
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About the founder: I’m Camila Russo, author of The Infinite Machine, the first book on the history of Ethereum. I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.