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The Future Seed Club Sees 🌱
Insights on the future of internet native organizations with the space's top network.
Hey friends. It’s been a few weeks. After Thanksgiving, I went Qatar to watch the USMNT get their asses kicked by the Dutch. But we’re back this week with a big piece about an organization that is doing more to advance the future of internet organizations than any other in the space. Their Demo Day is Friday. I’ll be tuning in, I recommend you do, too :)
Don’t call it a DAO
“I hate the word ‘DAO,’” Jess Sloss, founder of Seed Club, says to me over Zoom.
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This is a strange admission. Jess co-founded the most important DAO accelerator. He is the center of the DAO revolution. Sitting across from me with a studio microphone and a long beard, he looks every part the Web3 vision-guy.
But Jess is serious. “It carries a lot of baggage,” he says. He’s not wrong.
Blockchain projects are constantly in search of meme-market fit. They gradually evolve their terms to meet the current moment. This is why Bitcoin is – depending on the day of the week – either a faster, cheaper way to send money, an inflation hedge or a tool to fight authoritarian censorship.
The thing about decentralized products is they have decentralized narratives. The best (read: least falsifiable, most of-the-moment) story wins. But the problem with this narrative evolution is that people have long memories. So when one Bitcoin story is falsified, people don’t always freely flow to the next meme. They just remember that “Bitcoin” failed to live up to its last story.
DAOs, of course, are no different.
They have been heralded as the future of work, the future of community, the future of cities and the future of human-computer collaboration. But each of these stories has gaps. So in the last two years, DAOs have gone from being a utopian-pipe-dream to the-next-big-thing to a symbol of crypto’s penchant for overpromising and under-delivering.
All of this is to say: Jess’s point is fair.
The word “DAO” carries its scars. And some of those scars even predate Ethereum, the technology that enabled today’s Cambrian explosion of DAOs.
Before he founded Ethereum, Vitalik Buterin was a writer for Bitcoin Magazine. In 2013, he published a 4-part series called “Bootstrapping a Decentralized Corporation.” Buterin wrote that corporations were just people and contracts. He wondered what might happen if we got rid of the people running a company and replaced it with an algorithm. This algorithm could be a supply/demand balancer as in a market. It could also be an artificial intelligence designed to optimize for certain goals.
If you have ever seen the Matrix, or thought critically about AI, you might reasonably ask yourself: why would we want this?
Buterin’s claim is that an organization has built-in failure modes that code can correct. A leader goes astray (sup, SBF). A board misinterprets its mission (sup, Facebook).
By anchoring the mission and the incentives in immutable code, we can guard against these very human failings. In doing so, we allow “labor” – e.g. everyone other than management – to figure out the best ways to solve problems and then be fairly rewarded for it. The DAO has a mission, the algorithm sets incremental goals, the people receive compensation for achieving those goals.
In Vitalik’s vision, humans and machines would cooperate to create a truly meritocratic flow of value that could not be corrupted by centralized authority. Today’s DAOs have inherited this idea that clear mission, clear incentives and no centralized control leads to valuable emergent outcomes.
But that’s about all that they share with Buterin’s vision. Today’s DAOs are not, primarily, an algorithmic economic engine. They have more in-common with the utopian ideals of artist co-ops and socialist kibbutzim than they do with the libertarian, cyborg organizations of Buterin’s imagination.
The Social Token Renaissance
“When bankers get together for dinner,” Oscar Wilde once said, “they discuss art. When artists get together for dinner, they discuss money.”
The dream of artists achieving compensation commensurate with their contribution to the culture has endured for thousands of years. Sometimes those artists are painters or musicians. Sometimes they have a sick jump shot.
In 2019, NBA star Spencer Dinwiddie decided to tokenize his NBA contract, offering investors a tokenized bond against his future earnings. For Dinwiddie, the idea was that he could de-risk his career and begin to diversify investments. For his fans, the idea was increased connection and the potential to profit. The press from Dinwiddie’s initiative launched the 2019 social token era. Dinwiddie was followed by musician RAC. Then by ASMR influencer Laurel Driskell.
Soon thousands of influencers with an online audience tried their hands at launching their own branded token. What were these tokens for? What did they do for buyers or for sellers? That was unclear.
Some promised shares of future earnings. Others promised to go up in value based on the meme-worthiness of its creator. Still others offered access or consulting with a “thought leader” creator. Like patronage, the relationship was often ill-defined and unprofitable to either side. But amidst the craziness, some innovators saw potential. They saw opportunities to change the economic and the social relationship between influencer and community.
It’s at this emergent intersection of financial and social engineering, that we rejoin Seed Club.
In August 2020, Jess Sloss, Nicole d’Avis and a few friends launched a Telegram chat for their friends that they called Seed Club. But despite comparisons to Y Combinator, the inspiration for Seed Club was a way older and simpler idea than startup accelerator.
In 1937, the author Napoleon Hill coined the term “Mastermind groups” to describe how successful people would often rely on a group of like-minded peers to test their ideas and provide feedback. Jess had joined a few of these and wanted one for social token creators. So he started to assemble a group of friends that shared his interest and were curious about launching their own social tokens.
They wrote a Medium post soliciting other interested parties to join them. They positioned themselves as a “social token incubator.” But, true to the mastermind formula, they were not making investments of capital. Instead, they were cultivating a community of community builders. They wanted tinkerers who could share ideas and share inspiration.
“There were lots of new ways to raise capital,” Jess recalled. He went on, “That wasn’t the primary need for people experimenting with social tokens.” Put another way, no one needed a banker. What they needed was a fellow traveler.
That first “cohort” featured musician RAC, media aggregator Forefront and learning-community Kernel. Seed Club 1 generated useful insights if no runaway success. The Club was still in its early stages of learning, exploring and sense-making… It was quietly building momentum, but then came the Boom.
As Bitcoin surged to ~$60,000 ATHs and Ape NFTs sold for hundreds of thousands of dollars, the world grew re-enamored with crypto. And not just any crypto – but crypto art and crypto community!
What could a digital community empowered with tokens do? How would it function? Could it outcompete traditional organizations? Was there any steak underneath all that sizzle?
Seed Club had been on the edges of crypto’s collective consciousness when they started exploring these questions in the DeFi Days of 2020.
By Fall 2021, they were at the center of the zeitgeist.
Users flooded into their Discord. Their Twitter followers grew by the thousands. And their halo-effect started to shine on a new cohort of projects that represented a new type of community. Gone were the creator-fan token projects. In their place, was something more democratic and grassroots. The central question of Seed Club DAOs became: How can an incentivized online community create and share value together?
Even in a bear market, these communities have continued to build momentum. As “get-rich-quick” Crypto Twitter, craters, their enthusiasm and momentum remains unaffected. One of the benefits of a decentralized community, it turns out – is resilience.
But Jess is right – DAO is not a good name for any of these new organizations. A better one is a literal description of what they are: Internet Native Organizations.
The Internet Native Organization Era: From Culture to Capital
Steph Alinsug, Seed Club’s Media Steward, was one of those folks who arrived in the Seed Club Discord during the boom. But she’s no tourist. Steph started to build a reputation in the community as a great storyteller. Today she helps run the DAO.
As the community’s chief storyteller, she’s the exact right person to ask the question I’m putting to her today: “Is Seed Club covering too much ground? How can both a labor marketplace and a group trying to buy an NBA team both be Internet Native Organizations? Are these really the same thing?”
“They are.” She responds without missing a beat. “What unites them all is that they all touch a real-world physical experience.” They’re about bringing people together to do things offline. That’s what unites them.
It’s a point Jess builds on when we talk the next week: “They’re also a network of value. They share this property of creating real value and then reimagining how value flows through the network to the people creating it.”
If that seems abstract, that’s only because it is.
“A flow of value” or a “Real world experience” is not a single tangible “thing”. It is not a simple use case you can explain to your Mom or to your crypto-skeptic friends. But abstract ideas are powerful precisely because they can be instantiated and adapted in thousands of different ways. They are the primitives from which great things are built.
Still – after spending time with Jess and Steph, I think I have a more concrete description.
An internet native organization is a community of people who assemble and collaborate online for the purpose of creating and eventually capturing value in the real world. They are the economic equivalent of group chats or Reddit Forums.
And that flexibility is exactly why their economic impact could be as profound as social media’s impact has been on our culture.
For over a decade now, the internet has been the wellspring of our culture. Rappers come from Soundcloud. Celebrities start on TikTok. Memes start on Twitter. MAGA started on Reddit.
But as good as the users of the internet are at creating value, they have been really bad at capturing it.
Value capture goes to the platforms or the vultures. This is the core insight of the piece “Life After Lifestyle” by Tobi Shorin -a piece that has become influential in Seed Club’s social circles since it was published at FWBFest this past summer.
Tobi’s argument is that the emergence of online subcultures powered the rise of the 2010s DTC brands. An entrepreneur seeking a market could find a community of likeminded individuals on Instagram or Reddit, then sell their aesthetic and values back to them as a branded product. As a result, there was tremendous value in trend spotting for the last ten years, but not that much value in incubating communities that can start trends.
But what if we could change that? What if we could unify culture and commerce? What if we could let these online communities create, operate and profit from the goods and services that speak to them?
Imagine you’re a member of a community of surfers. You go surfing. You watch surfing YouTube videos. You even post in surfer forums. Today, there are brands that appropriate your style and sell it back to you. Tomorrow, you could be a member of a community that develops products according to your feedback, sells it to other people, and shares profits with you. When you get bored of surfing, you might even sell your early membership stake to new surfers.
Rather than being the inspiration and the customer, you are now an NFT-carrying member of the Surfer Community. The culture draws you in, the community creates value through your investment of time and capital.
To put it the way Seed Club does: if Y Combinator is about building something people want, Seed Club is about building something people want to be a part of.
But to build something people want to be a part of, you have to draw them in. And that takes one damn good Call to Adventure.
The Call to Adventure: Forming a Community
Imagine you want to organize a community to achieve a mission like, say, buying a golf course. You need to find people who buy into that vision. But more than that, you need to find folks who are willing to invest in it. That investment might be capital, time or reputation. But it's always an investment. And investments are inherently speculation.
“Not all speculation is bad,” Steph tells me during our second conversation. “Speculation is optimism. It’s a bet on the future.”
The first step in encouraging the right kind of speculation is telling the right kind of story. Humans are narrative creatures. We understand the world through the stories we tell one another. Even in our own lives, we conceive of our trials and tribulations as stories. And so if you want people to join you on an adventure, you have to convince them that their personal story will be more fulfilling if they interweave it with yours.
You need what Joseph Campbell called The Call to Adventure.
Campbell described this as the moment a story’s hero becomes aware of a grand adventure awaiting them. It’s Luke being asked to accompany Obi Wan. It’s Neo taking the red pill. It’s Moses seeing the burning bush.
It’s the moment where a community introduces a new recruit to the bigger purpose that they can help achieve.
In DAO culture, these calls to adventure are usually memes. “We’re going to buy the Constitution.” “We’re going to disrupt the global financial system.” “We’re going to create the next great media company.” “We’re going to build a new city.”
It’s the rallying cry that brings the community together.
But that meme is just a spark.
It needs to be cultivated if it will grow into an enduring bonfire that continually engages members. And this is where most DAOs struggle. It’s why everyone is excited about an NFT mint but then bored by the actual community.
To build a community with lasting value, you have to nail what Steph calls, “The Trifecta of Culture Building”.
Community Practices or Rituals. - Repeated moments that reinforce membership in the community. This can be a weekly call or an annual retreat. The more frequent the reinforcement, the better.
The Product Experience. - This is the core of the community. It is how folks interact on a daily basis and what they are building together. In the case of Arkive’s decentralized museum, it might be the process of selecting works. It is the tentpole experience that instantiates the meme.
Storytelling. - Finally, there’s the mythology of the organization. Why are we doing this? Why does it matter? How do I fit into a bigger vision? The better the story, the more motivated the community.
If you succeed in building this culture, your community transcends financial speculation. It becomes a bet on the community and the culture. And that’s how It becomes a part of members’ identity This is why people list their affiliation with FWB or LinksDAO in their Twitter bios alongside their city, their employer and their alma mater. It’s why profile picture NFTs are so popular.
Seed Club has recently been encouraging more communities to use NFTs rather than ERC20s as their membership token. That’s because NFTs are better at encouraging “the right kind of speculation.”
In Seed Club’s experience, using NFTs rather than ERC20s encourages a more balanced approach to speculation. It still provides for exit liquidity and a freeflow of members, but it limits speculation because the nonfungibility and lower volume of tokens makes it more challenging to flip assets quickly. Instead, it attracts people who are betting on the future of the community, but also willing to invest their reputational capital in its success.
After all, even the worst finance bros don’t use stock tickers as their profile pic.
The Value Must Flow!
In software, people talk about two models of building: a cathedral and a bazaar.
In the Cathedral model, a visionary creates and implements a precise singular product. Their idea, their team, their execution so they get to capture the value.
Then there’s the Bazaar model. Just like a marketplace, a bazaar evolves as individuals, each pursuing their own incentives, build a structure that a single planner could never have anticipated. The most unexpected and interesting projects tend to be bazaars.
Fundamentally, a DAO is a bet on the gradual power of the bazaar model.
Once a community internalizes the constraint of a mission, they can be freed to build on it quickly. They can push it into new directions. They can unlock value that a creator might never have imagined themselves.
This is how a project that put 10,000 ape jpegs into the world last Spring now has worldwide events, music videos made by Eminem and Snoop Dogg, a budding metaverse and multiple independent creative projects under development.
There’s no doubt that this model can create massive amounts of value. It already has.
Take Seed Club itself.
The DAO has a token but does not require organizations that join its cohort to accept investment. Instead it often negotiates “token swaps” with organizations that it works with, functionally forming “alliances” or “marriages” with these communities. But its approach also creates many other avenues for capturing value.
There’s Seed Club Ventures, a separate organization that invests in technology that DAO communities can use. There’s Seed Club’s own product team which builds technology to power the DAO and could eventually license it out to other organizations. There’s its nascent media and branding operation that create the preconditions for a number of partnership opportunities. This “all of the above” approach to investing in future revenue streams is emerging as a standard for the best DAO communities. Let a thousand flowers bloom, then sell the ones that survive!
But the open question — one that Jess considers the most important confronting today’s community members– is how do you capture value in a way that ensures it flows to the people creating it? That’s a question as old as economics.
Adam Smith says value should flow to whoever the invisible hand decides. Karl Marx says it is stolen by capital and should be returned to labor.What do DAOs say? It’s complicated.
“The design space of human coordination is limitless,” Steph says. That’s both the opportunity and the challenge for DAOs at this moment. And the truth is there is no shortage of experiments in ways to capture or distribute value.
If DAOs have an advantage over traditional organizations here, it is that transparency, community consensus and decentralized power should provide a check against “early” folks extracting disproportionate rents.
That transparency is already flowing into how work is completed and rewarded. Bounty systems offer payment in a community’s native token (or in ETH to let you buy that token) for completing specific work. There’s token grants for larger projects. There’s PropHouse and Jokerace that both try to gamify selecting which projects get investment. There’s Coordinape for encouraging the community to assess and reward its own members.
Much of the excitement over Web3 is that it enables a fairer ownership structure that can more equally split compensation between owners, builders and users. But for builders, the devil – and the opportunity – is in the details. The good and the bad news is — there’s plenty of work left to be done here.
Last year, when 17,000 strangers came together online to try (and fail) to purchase a copy of the Constitution, it seemed like DAOs were ready for their breakout moment. But the momentum receded, and despite some notable projects – many from Seed Club – none have burst into mainstream consciousness just yet.
“I’m glad we haven’t had that moment,” Jess tells me. There are still lots of kinks to work out in community building and incentive design. Seed Club has a lot more members today than it did in August 2020, but in some ways, they are still that same group of explorers, eyes trained on the horizon, exploring the digital unknown.
Still, Jess is optimistic. There may not be a single breakout star, but there are now tens - maybe hundreds - of growing, engaged and financially incentivized online communities.
The next massive internet movement is already here. Just, please, for the love of God – don’t call it a DAO.