Animoca Brands Co-Founder and Executive Chairman Yat Siu
Tech giants like Facebook and Microsoft have started building their own tiny meta kingdoms to gain from the growing popularity of metaverse. The only way to fight them is by creating and supporting thousands of tech companies that are building open metaverse, according to Yat Siu, Co-Founder of Animoca Brands.
“While investing in and supporting small companies in the open metaverse, we are creating a movement. That’s why we invest so aggressively. This way, we want to give some autonomy to people,” he says.
Animoca Brands, a Hong Kong-based blockchain, NFT gaming and VC firm, has already invested in tens of startups in Asia, including Axie Infinity, OpenSea, Dapper Labs, Yield Guild Games, Harmony, Alien Worlds, and Star Atlas. The firm now has a growing portfolio of more than 150 investments in NFT-related companies and decentralised projects.
e27 recently sat with Siu for an interview, who discussed why metaverse is essential and how it will redefine the way we live and work.
Below are the edited excerpts from the conversation:
You have invested in several companies. How is your investment strategy different from that of a traditional VC firm?
As an investor, we have a different set of goals. Our macro goal is to see the open metaverse and build Web3. We want to only invest in companies that are building open. You may be making the best beautiful game in the world, but if you’re not planning to build an open, we’re not interested because it doesn’t fit our purpose.
It goes back to our original thesis around a shared network effect. If we can build into a shared network and help grow a business, it will ultimately help grow the rest of the companies, too, because it’s part of the global economy.
Also Read: Animoca Brands unit invests US$50M in Brinc’s metaverse accelerator programme
The other difference is that we are not obligated to return the capital to our investors, unlike a traditional VC fund. But the issue is that you have to pay your LPs out with what you have. But when it comes to the web3 ecosystem, it’s taking value out of that ecosystem. We would be much more comfortable if we could do this and give people crypto to reinvest to buy NFTs. Our purpose and goal are to have people join web3, and this is a balancing act.
We understand people want to make a profit; nothing wrong with that. But we also want you to participate in the ecosystem of the ultimate Web2 and We3. Because if everyone just were there to try to take money out, that would not be healthy. So this is how our target is differently aligned.
What happens, though, is if you invest in projects that Animoca brands are backing, or if you own the NFTs of our projects are supporting, theoretically, if the network effect grows because we’re investing open, then the shared network effect will increase in value.
An analogy is that if you own real estate in Singapore and when the country’s tourism industry grows, your real estate will also increase because you benefited from the network effect of the entire city. You also benefit when its tech industry or restaurant grows.
So that’s kind of the effect we’re looking for. So if you build open, we all win and benefit because we participate.
Does this mean you are driving companies like Microsoft and Facebook crazy by investing in the small metaverse, NFTs and blockchain startups?
Yes. Let’s look at the way the internet started. At the beginning of the internet revolution, investors focused on making profits. If we had purposeful investors who wanted to build an open web back then — which was the objective initially — we would have ensured that the ethos of web1 and web2 stayed more open.
But the nature of capitalism is to maximise profits. When investors discovered they could maximise profit by controlling at least in the paradigm of web2, they did it. But what happened was that it created a zero-sum scenario, where VCs would back a winner. The ultimate result was that the money was funnelled into big companies and unicorns. Small companies never got any help because VCs at that scale would recognise that if they invested in a promising startup, the chances of success were so small.
For instance, if you had invested in Facebook as a public company, you would have made 20-30x. But you are not supposed to make this type of return on a public company that’s supposed to be already mature. That is the issue, meaning the value is controlled only at the top. This way, you are creating a centralised structure.
Our investment strategy is designed not to do that.
Do you believe Facebook will become an open metaverse company eventually that will share revenue with its users?
Facebook, or Meta, probably won’t work on delivering a truly open metaverse because it is a centralised company and as such decentralisation is not in its perceived interest. I think Facebook will try to co-opt the metaverse, just as it co-opted web2, but our hope is that the open approach to the metaverse becomes so dominant that Facebook and companies like it will have no choice but to participate in an open manner.
In the long run, Facebook may well have no choice but to take an open approach, because the economic activity in the open metaverse will be so significant that Facebook and similar closed platforms will not want to miss out on the opportunity.
How does web3’s future look in Asia and Southeast Asia?
Web3 is going to redraw labour in a big way. It is a big opportunity because the kind of labour you perform in the metaverse is more efficient, less dangerous, and better for game players.
Secondly, everything is headed towards the metaverse, anyway. Great value is being generated there. In the web2 paradigm, spending time and effort isn’t rewarded. On web3, however, the users benefit from it. Indeed, the value already existed online, but it is just that it was all centralised and wasn’t shared. So I think web3 will be a breakthrough in places that don’t have economic potential.
Third, web3 will create new tax revenues for countries like India and the Philippines. In the past, these countries had big call centres and acted as the customer service centres for the rest of the world. However, they made very little money for that service.
However, web3 allows these countries to participate in the global economy. Two things will happen here. One, they will expand on their capability. But it goes beyond that. I may be living in India or the Philippines, but web3 and metaverse allow me to buy assets in the US or elsewhere.
Also Read: ‘We want to facilitate organisations’ Web3 transition from bits to atoms’: Brinc CEO Manav Gupta
In the earlier scenario, a person sitting in India could not buy something in New York because if I want to buy something in America, first I need to go there. But in the metaverse, I can do anything if I understand it. I could buy something in The Sandbox. We are already seeing people in the Philippines, Ecuador and India playing Axies or The Sandbox and earning money.
In some cases, these gamers now have two years’ worth of their salary. They don’t cash it out but invest it in other industries, which is good for the ecosystem. It allows them to participate in new projects.
For us, the principal paradigm of web2 is digital ownership and digital property rights. So when you think of anything related to this property, everything will be digital property. Everything will be a form of property in the virtual world because every creative idea can become an asset.
When I’m writing a story, it’s a creative endeavour. In the web3 paradigm, it becomes an asset. However, in the current web2 paradigm, it’s just content.
I know it is too early to ask, but what is going to be web4?
We haven’t thought of web4 per se because we are still early on web3.
As we know, the foundation of web3 is digital property rights. Some people think, ‘Oh, the metaverse is like AR and VR’ and so on. AR and VR are the interfaces, but that’s not what makes them valuable. The foundation of the societies isn’t based on the modernity of the facility. But it’s based on the fact that you have civil liberties, freedom and ownership.
You can own your house and be safe; nobody can take it away. It means you can now invest in a home and pass it to your children. So that’s the first foundation we need. That is what web3 will do.
The other thing is this: there are 4.6 billion people online and 3.2 billion play games, but there are only 10-20 million people in the open metaverse. From that perspective, you have a long way to go before talking about Web4.
As web3 grows in its popularity, the interfaces will also change. The hardware will also evolve. We will get into states where we will eventually have brain implants in the future and will have faster interfaces.
So the shift in all of this has to do with the computing power. For instance, the data paradigm allowed for data, machine learning and AI to become powerful. But if the computing power weren’t fast enough, AI would not work.
So the next level will be that the paradigms will shift when quantum computing becomes more mainstream because then you have a new level of computing power, which opens up new dimensions.
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