FV III: The End of The Beginning
Today, Framework announced the completed raise of “FVIII”, an oversubscribed $400 million fund for investment in early-stage blockchain gaming, Web3, and DeFi startups and networks. With the closing of this third fund, Framework Ventures now manages approximately $1.4 billion in assets, not including our sister company, Framework Labs. We have grown to 22 people, 7 of which are on the investment team. The rest of the team is mostly engineers, focused on running infrastructure, staking and participating in DeFi markets. If you have used crypto in the past few years, there is a strong chance you have interacted with Framework.
Guiding FVIII is the belief that we stand at the precipice of hypergrowth for consumer blockchain applications. We have deep conviction that the products being built today are the ones that will open the floodgates to billions of new users over the next decade and become the next software leaders. It has taken almost 10 years of technology maturation, iteration, and failure to get blockchains ready for their consumer moment, but we believe it is now here. Developer tools have collapsed build time to months instead of years, blockchains have scaled to <20c tx fees across multiple chains, and wallets have improved to the point where onboarding 1Bn+ users is feasible. Blockchain technology is finally catching up to meet a demand that has, until recently, been only hypothetical.
The increased demand for blockspace has come from users in the large end markets of gaming, content, and commerce. Developer focus has moved from overcoming infrastructure hurdles towards building applications that people actually want to use, and the industry has grown as a result. Today there are ~30M MAUs of blockchains, up ~54x from 2020, experimenting with primitive social networks, games, and fintech. To illustrate the scale of the industry; OpenSea now has more NFTs indexed than Google has web pages, DeFi has reached more than $200 bn in total value locked, and Ethereum has burned 2.1M in ETH Fees over the past nine months. All of a sudden, crypto has grown from a niche industry of enthusiasts to an emerging sector with a real user base and a vibrant ecosystem.
Through this growth we have collectively discovered that blockchains are a compelling business model for most (if not all) digital marketplaces, and that the most powerful Web2 incumbents are simple marketplaces. Entrepreneurs are drawn towards crypto because it gives them a legitimate advantage against these incumbents by virtue of composability, tokens and wallets. The new era of founders understand that native monetization for open source technology is a major breakthrough that allows for new types of economic relationships between developers and users of blockchains. There is also a sense that it is fun to build in a space where all the decisions haven’t been made and walled gardens put up.
With all of this momentum, it begs the question, where will we be in 2030?
Powerful shifts in technology or investing begin when either a new type of computer is adopted or a new type of asset class is institutionalized. Crypto is powerful because it is both a new type of distributed computer for developers - blockchains, and also the conduit for an entirely new asset class to be created - tokens. When a new computer is invented, we see new tech paradigms like cloud, social and mobile that enable new uses of technology. When a new type of asset is institutionalized, we see new types of investors and markets. We have never seen both of these things occur simultaneously before, and the crypto use case acceleration speaks volumes.
In the 2017 bull run, blockchains were only used to transit assets to and from centralized exchanges, and Tether was still on Bitcoin. During the 2020 DeFi Summer, people used smart contracts in groups for the first time amidst a Cambrian explosion of new financial primitives built atop Ethereum. In 2021, we saw millions play Axie Infinity every day to earn a livable wage, creating a self-sustaining global neoconomy with their own native currency. We are accelerating towards a future where blockchain is as ubiquitous as the internet, and as disruptive as the invention of the joint-stock corporation.
As part of our strategy for FVIII, we have developed several operating assumptions about what the world will look like in 2030:
-Blockchains have 1-3Bn MAUs
-DeFi has $10Tn in TVL
-1M developers building on blockchains globally
-Blockchains scaled to <10C cost level at 1-3Bn MAUs
-P2E games become the largest employer of human beings globally
-5-10 P2E games with 100M+ MAU
-Many people known to others by their alts as opposed to their real name/identity
-10 DAOs manage over $100Bn each
-A smart contract hack worth $10Bn+ occurs
-DeFi remains the largest vertical by revenue and profit share
-DeFi derivatives and spot markets have larger volume than CeFi
-Most centralized exchanges route liquidity to KYC-Fi
-Most existing digital marketplaces move on-chain
-Most social media networks and interactions exist on-chain
-Crypto will financialize most existing Web2 use cases, replacing ad-based monetization with tokenized attention loops
-Global policy on crypto shifts positively, manifesting in an “Al Gore of crypto”
-The most valuable assets on-chain will be tokenized, massive ML models
-Blockchains become the de facto venue for issuing sovereign debt
-A medium sized nation forks Worldcoin and takes the founders cut
-Governments issue on-chain UBI to people who complete blockchain tasks
-The top MEV searcher group in the world earns yearly profits in excess of $1Bn
-The most popular global sports team is an on-chain gaming guild
-Most SaaS businesses have their own L2 on Ethereum, replacing their public-facing API
-The most valuable individual art pieces are on-chain
As we onboard billions of new people, our industry will change to the point of being unrecognizable. Today we are living in the good ole days, despite having progressed so far from the origins of crypto itself.
We started Framework Ventures at the bottom of a bear market in 2019, working out of Michael’s parents basement. At the time, Sand Hill Road largely considered crypto to be a peculiar sideshow at best. The idea that we would eventually be successful enough to raise another two funds was extremely far-fetched to say the least. We were singularly focused on running infrastructure, staking, voting, leading deals, and helping build some of the first crypto native communities. We are extremely proud of both the work we did to help crypto find its feet, as well as the steps we’ve taken to turn Framework into what it is today.
Thank you to the communities and founders who have supported us over the past few years. We’ve grown up here and it has always felt like we’ve had crypto-natives on our side as we’ve built Framework. Now with more scale, we can continue to expand the mission of Framework, which is to be the best stewards of Web3 possible.
Disclosures:
Under no circumstances should this article be construed as or relied upon in any manner as investment, legal, tax, financial or other advice. You should consult your own advisers as to legal, business, tax, financial and other related matters concerning any investment. Further, under no circumstances should anything in this article be construed as an offer soliciting the purchase or sale of any security or asset of any kind, including but not limited to interests in any pooled investment vehicle sponsored, discussed, or mentioned by the Framework or its personnel (collectively, the “Funds”); nor should anything be construed as an offer to provide investment advisory services. Any offers to invest in Funds will be made separately and only by means of targeted distribution of confidential offering documents relating to specific Funds, which should be read in their entirety, and which will be provided only to those who, among other requirements, meet certain qualifications under federal securities laws. Such investors, defined generally as accredited investors and/or qualified purchasers, are generally deemed capable of evaluating the merits and risks of prospective investments and financial matters.
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Past performance is no guarantee of future results. The Funds’ investment objectives, generally, are to achieve capital appreciation by making long-term investments in venture capital, private equity, and various digital assets. There can be no assurance that the Funds will achieve comparable results, that targeted returns, diversification, or asset allocations will be met, or that Framework or the Funds will be able to successfully implement their investment strategies, investment approaches or achieve their investment objectives. Any investment in a Fund involves a high degree of risk and investors could lose all or substantially all of their investments in any Fund.