INVESTMENT PHILOSOPHY
EVOLUTION OF THE INTERNET
Web3 is a catch-all term for the next generation of a new, enhanced internet that uses blockchain technology to enable new virtual experiences, increase business efficiencies, and power the creator economy. The first version of the internet consisted of static, read-only HTML web pages such as basic encyclopedias. The second version of the internet brought forth the interactive, user-generated social media and e-commerce applications that we know and use today.
Web3 will offer a more immersive experience than Web2. For example, Web3 will provide users the ability to digest information through 3D graphical interfaces rather than 2D screens of text. Most importantly, technology such as blockchain, cryptography, and distributed computing will enable the next generation of the internet to be decentralized. Decentralization flips the script on data ownership and monetization; rather than consumers being "the product" by logging into centralized services run by large corporations (e.g., Google, Facebook) that collect, own, and sell user data, users will be able to fully own and be in control of their own data and how it is used.
Today, we are in between the Web2 and Web3 iterations of the internet, providing a massive opportunity at the perfect time to help shape the future of Web3 through investments and startup support. The below diagram highlights the differences and illustrates the advancements between Web1, Web2, and Web3.
INVESTMENT PHILOSOPHY
Outshine Ventures strives to be the partner of choice for early-stage founders who are solving complex, real-world problems, and who are passionate about building the next generation of the internet. We are inspired by founder dedication, perseverance, and creativity, as well as, elegant technical designs and innovative products with simple, clean, and intuitive user experiences.
Our goal is to discover and help build sustainable businesses alongside humble founders that are disrupting Web2, practice responsible growth, have the ability to generate significant demand, have a strong customer pipeline, and have realistic revenue models and token models (where applicable).
While we are excited by businesses with real token use cases, we are mindful that not all Web3 startups and applications require decentralization or a token. Therefore, we remain focused on companies that are solving real problems, generating significant user demand, and building a sustainable business, regardless of the need for a token. Furthermore, we do not recommend incorporating a token into a business model unless it contributes to the startup's core value proposition, or is imperative for the operation of a blockchain.
Founder Support
While powered by an angel network, Outshine Ventures operates with the strength of a VC firm when it comes to supporting founders. The Managing Partners personally support portfolio companies by providing product strategy guidance, token model reviews, market and competitive analysis, talent search, financial analysis, and fundraising assistance in current and future rounds. We also encourage our Angel Network to support where and when they can.
Sourcing & Due Diligence
We source investment opportunities through our robust network of investors, founders, sourcing partners, and experts in Web3. All due diligence is performed by the Outshine Ventures team, and includes deep research on the founding team, product, technology, traction / customer pipeline, go-to-market plan, competitive advantage, revenue model, tokenomics, references, cap table, and potential exit opportunities (e.g., potential acquirers). We often collaborate with the brightest minds at other Web3 VC funds to exchange insights, inform potential lead investors, and create co-investment partnerships.
INVESTMENT THEMES
We are confident that the following core investment areas have the potential for tremendous growth in the years ahead.
Web 2.5
We believe the next billion users in Web3 will be consumers who migrate from Web2 through well known brands and companies. In order for these companies to conduct business in Web3, they need new infrastructure and technology. Web2.5 startups provide this technology, as they are focused on bridging Web2 and Web3. While Web2.5 startups are not necessarily built on a blockchain or utilizing blockchain technology themselves, they are instrumental in increasing Web3 adoption and overall progressing the Web3 space.
Consumer
In order to attract and retain consumers in Web3, it is imperative for Web3 applications to have a clean and simple user interface and experience. Today, many of these applications have sub-par UI and UX, leaving only persistent crypto-native users the ability to navigate murky processes to participate in the ecosystem. We look for innovative products and technology across decentralized finance, gaming, e-commerce, metaverse, and virtual reality (to name a few) that are able to enhance a user’s experience while keeping everything simple and easy to use.
Security
Along with user experience, security is one of the biggest pain points for everyone in Web3. 2022 saw the largest loss of funds through smart contract exploits, scams, phishing attacks, hacks, improper treasury management, and fraud. We are seeking startups that are making Web3 a safer and more secure place for users and enterprises. Some examples include: smart contract security scans for both users and enterprises, enhanced private key management, on-chain financial auditing, and new secure solutions for cross-chain transfers to replace easily exploitable bridges.
Privacy and identity management are two other important aspects of Web3 security. Digital identity management tools serve as crucial building blocks for Web3 so users can take secure ownership of their identity while mitigating risks around identity theft. Web3 users who own their identities achieve self-sovereign identity (SSI), meaning they can share digital credentials securely and control how their personal information is being used digitally.
We are exploring startups that are solving these problems through decentralized identifiers (DIDs) that enable an entity to be identified in a verifiable manner, privacy networks that digitally transfer value while safeguarding personal information, and zero-knowledge proofs that allow information verification without raw data exposure.
Decentralized Infrastructure
While there is growing institutional interest in migrating to Web3, there is also still some debate on why established Web2 businesses would adopt decentralized infrastructure. For traditional financial institutions, permissioned blockchain infrastructure can be used to replace legacy bank transfers, enable cross-border payments, and achieve instant trade settlements. In our view, it would only make sense for financial institutions and established businesses to migrate to decentralized infrastructure if it becomes faster, cheaper, and more reliable than today's existing centralized solutions.
On the other hand, decentralized infrastructure is vital for Web3 startups with core value propositions centered on providing a trustless, permissionless, and non-stoppable application and experience. A few examples of these startups include decentralized and permissionless internet networks, Web3 social media platforms, decentralized finance applications, blockchain-based logistics management and supply chain visibility, digital file storage, and real world asset proof of ownership.
Decentralized infrastructure is a core focus area for Outshine Ventures, as it is vertical agnostic and influences both Web2 and Web3. More specifically within this investment theme, we look for startups focused on decentralized networks, decentralized data storage, decentralized scaling compute, blockchain data analytics, no-code Web3 apps, multi-chain interoperable infrastructure, and the utilization of zero-knowledge proofs.
FINAL THOUGHTS
We believe Web3 is the next generation of the internet. Blockchain technology is enabling business efficiencies and virtual experiences that were once unimaginable, and are now permeating throughout all industries on Earth and beyond.
Let's build a brighter future. Together.
Shayna & Maria