Venture Capitalists And Communities

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Many are beginning to see the value in communities and the potential as a basis for most everything. While this is certainly the case, there are some challenges. One of the biggest is the fact that many are approaching it with the same mindset as before.

Our present system is filled with people who look to do nothing but extract from what is taking place. They come by many names, most notably, rent seekers. They provide a service and take a sliver of each transaction. This caused the system to be centralized which usually creates more of this behavior.

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Over time, the number of people sucking things out of the system outweigh those contributing. We end up with the pace of expansion diminishing as those who extract from the system end up flattening it.

The existing mindset is to get as much many as one can. People enter with the single focus of "what can I get out of it". This exists at the corporate and individual level.

Certainly there is nothing wrong with making money. However, if that is the single focus, in a community driven economy, it will fail.

Build The Community First

We are going to see a lot of failures by popular individuals who have a following. They have the advantage that the community already exists. Nevertheless, the mindset is to approach it to leverage financially. NFTs are an area we are already seeing this.

For example, the Kings of Leon made headlines with their entry into this market. Their idea was sound, the problem was the approach. It was really nothing more than a money grab. They did not develop the community to the point where it was actively involved in this layer. Tokenization is a different level than just a fanbase.

Hence the value of the NFTs dropped. There were only a few who were able to participate, reducing the impact of the community to only a small portion of the whole. Sure, the band made money, so from that point of view it was a success. The long-term effect, however, is a different story.

Certainly the Kings of Leon might be big enough they could go to the same well again. Yet, a smaller community is not going to be as forgiving. This is where the mindset has to change.

The approach is to think about the community first and the money will follow. In this situation, the Kings (or any other influencer) can have a printing press if the approach is correct. Develop the tokenized layer of the fanbase to the point where even the most financially challenged fans can participate and we will see a community that will flourish.

A Non-Extractive Approach

We are going to see success come to those who take a non-extractive approach to the tokenization of their communities. This is where the members will keep coming back to help out.

The payoff comes from growth. If we take a look at things from a financial perspective, we can see the sensibility of this.

As the community expands, the network effect starts to kick in. We know the value of this in financial terms from the mega-tech companies. It is simply impossible to ignore the fact that insane valuation is generated.

Of course, the problem with any community is that those who seek to continually take from the system end up potentially sabotaging the entire process. This is what it looks like Kings of Leon did. That came from the top but it easily could happen to those who are simply just involved with the community.

Here is where the common mindset will start to alter the behaviors of those who are not looking to play along. It is easy to surmise that the tolerance for takers will diminish. Those who do not show dedication to the community and a willingness to contribute will end up being ostracized. This will be especially true for those communities established as tokenized from the start.

A Replacement For The Venture Capital System

Here is where we can already foresee a major clash taking place.

Venture Capitalists provide a service which is very helpful. They are willing to put up a lot of money on risky projects in the hopes of a few of them succeeding. The challenge with this process is the community get all the benefits of the features yet none of the financial rewards. All of this goes to the VCs and founders.

Obviously the VCs are extractors. They can pull out tens of billions of dollars from extremely successful projects. For the most part, with tech, this is on the shoulders of users. It is easy to see how conflict arises between the two parties. Platforms are obligated to adhere to the VC's wishes since they are the ones who put up the money. At some point in time the users need to be monetized.

We are now seeing this in the cryptocurrency. Applications are being funded by venture capital companies, the same as before. We saw this with Coinbase™ and the money extracted from there. The result is does anyone feel loyalty and dedication to this company? Is the user base really a true community?

It would seem that is not the case. There is no tokenized layer with Coinbase™, hence few have much interest in that platform outside the service it provides. They were funded by outside money which ended up being returned to the VCs through the enormous IPO the company held.

The problem is the users got none of the financial benefit. It is something that we see across the entire business spectrum. Online this is the model of Web 2.0.

Here is where we see things changing. With the introduction of cryptocurrency, Web 3.0 can start to emerge. This is a completely new financial model based upon community. Hence, as mentioned above, the idea of extraction isn't going to hold up.

Communities are going to develop their own self-funding mechanisms which will make the VCs obsolete. The projects presently being develop via this approach will hit the market due to large financial backing. However, like with Coinbase™, what loyalty will there be? Everyone will soon figure out that the financial benefits are not going to them. It will be the proverbial "the users are the product".

Since users are not going to accept that as the new model emerges, those applications that are founded this way could encounter difficulty. The extraction model is going to die off as time passes. There will be other options emerging that are inclusive and provide distribution that allows more to gain financially.

The community based business model is shaping up to be very powerful. It is going to affect every industry. Delving through the process in this article, hopefully it is clear how things are going to unfold.

We can see how the mindset of a money grab needs to change. As communities develop, it is going to not be tolerated. Those who are involved in those groups for the long-term will end up benefiting. Unfortunately, it is going to take a while for most to see this.

Nevertheless, the foundation is going into place. Those that are aware of what is being laid will see the opportunities presented before them.

The business model is going to be changing and Venture Capitalists will be replace with communities. This opens up a host of other possibilities.


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I completely agree with everything that has been said in this article but I do want to point out a possible problem that is already emerging with decentralized governance - voting.

If we want a decentralized VC fund we want the community to decide who gets the funding. This sounds amazing on paper but getting people to vote without any immediate incentive is insanely hard. If you don't give them a promise of an airdrop or "sure profit" they will just forget about the whole thing and presume someone else will do the work for them.

This can be seen in DAO funds and DeFi in general. Most of the participants are in it for the profits, not the innovation.

That leads us to delegation which is in a way the same thing and centralized governance. Even though you can undelegate your voting rights when someone makes a bad call instantly, that call can not be reversed without a new governance vote.

A bright future indeed but we are still far from a perfect governance system to make it a reality.

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Good point. I believe it's gonna take some time to shift that mindset.

The governance system we have is far from perfect and maybe there is no such thing as a perfect system, but this one is already much better than anything else I know. Hopefully, we'll learn and adapt so it becomes even better in the future.

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That is true. It was not covered here but governance is something that we need to start experimenting with more. There are not enough different projects toying around with innovative governance models.

We do need to develop some that are better than what we have now. This will not occur without experimentation.

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Yup. Looking into different governance models on many different chains and nothing creative enough has popped up so far.

We need something with push notifications and constant incentives/penalties for starters imo.

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The truth is 'milkers' would always be more than community oriented individuals.

And people with that extraction minded would not simply stop because they are told to do so.

I think the biggest problem is that this attitude is in reference to Decentralized community.

If it was a centralized community there could have been laws or regulations to reduce the extractors to barest minimum, but in a decentralized community very little can be done . I believe something can be done anyways, but since this is all new to us, to procure a solution to the concern raised here will take time.


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It is the centralized entities that allow the extractors to exist.

If it was a centralized community there could have been laws or regulations to reduce the extractors to barest minimum

The exact opposite happens. The laws are written to protect the extractors. Look at the banking system.

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The approach is to think about the community first and the money will follow.

The problem is the fact that most people apply reversed (or even worse) approach. Money comes first, and the community second (or not at all).

This is reflected mainly in the fact that nowadays the average number of comments per post is 2-3 on the Hive blockchain, and most of those comments are bot comments

The real human comments are rare. And when I ask where is the community, some people tell me "on Discord". This is like asking "where is the car community", and getting the answer that "they are on motorcycles".

Sounds foolish, right?

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The problem is the fact that most people apply reversed (or even worse) approach. Money comes first, and the community second (or not at all).

This is 1000% true. Most people have the exact opposite mindset, simply try to get what they can out of it. This is cryptocurrency's largest mistake so far. We spent so much time worried about prices and Lambos and very little on actually changing the world.

The real human comments are rare. And when I ask where is the community, some people tell me "on Discord".

Again you are 100% correct. It is ironic to see a bunch of people who advocate for decentralization spending their hours on Discord, leave hundreds of messages per day.

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The community based business model is shaping up to be very powerful.

You're totally correct. The truth is that communities contribute to build and in so doing, the one's who contribute the most actually gets rewarded the most. Its a model I feel its shaping up to take over especially in the tokenisation process like you've mentioned.
Truth is, those who just extracts and give no value will actually accrue no value overtime.

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I have a feeling as the mindset shifts, we will see that behavior ostracized in many communities. It will take a while to get there.

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Yes if we can see people shift from the current model, maybe we can see the current corporate model also change. Right now mega big corporations just issue stock bonuses so they don't really care if the company does well so long as the stock does well.

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It always amuses me that the same VC’s are always funding the right projects at the right time. It’s like they have a crystal ball. It’s also created a two tier system which is the backbone of the legacy VC system. The purpose is to extract value and be first. It would be nice to see this change via the blockchain and rid us of the middle men. I mean how many lambos and houses does one person need?? :)

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That's true... I never worked in VC but one of my mentors has. From what I could gather, they really have some talented people who can spot some signs that a business is going to succeed, but there is also a lot of politics involved and also statistics. The big ones can fund so many business that even if 90% of them fail (which happens a lot), the 10% that succeed will more than make up for the money that was lost.

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That's a good point. We're starting to build that model, but unfortunately, there are still a lot of people who are only willing to extract.

We're slowly changing that mindset, but it's gonna be a while

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Kings of Leon may have been better suited if they created something like a Tribe for their fanbase to grow together and interact with one another. Musicians are nothing without their fans.

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