January 17, 2018

Decentralized Startups

Musings on the future of work and threat to the way we build startups today

I met Matt in 2012 when he was working on his first startup, Coderwall. Our interaction was brief but memorable. A year later he subscribed to a newsletter Nathan Bashaw and I published weekly. I noticed and reached out.

I had just transitioned to part-time at another startup, exploring new opportunities.

On August 14, 2013 Matt and I met at Epicenter Cafe (before my Philz obsession). We sat at one of the tables in the back and started talking about his new startup, Assembly, a platform to empower developers around the world to self-assemble and build products together. But unlike traditional open source communities, Assembly introduced a token system — called App Coins — to reward people for their contributions, enabling people to earn a stake in the product’s success. As he described his vision, I couldn’t help but think of all the many ways this might not work… and how epic it would be if it did.

After overcoming legal hurdles and raising a seed round, Matt and team launched Assembly and its community got to work. They built a support tool called Helpful, an art discovery platform called Artfactum, and even a Product Hunt for games called Gamamia. It was awesome to see.

But unfortunately, Assembly came to an end and the USV-backed company shut down in late 2015.

Today we’re seeing a new wave of people that share Assembly’s mission in various forms, building platforms to enable decentralized startups.

Crossroads in 2014

In early 2014 Product Hunt started getting traction. The opportunity became clear but I needed help to get there. I didn’t have money to pay anyone a living wage as I was dipping into my own savings to afford to live in San Francisco, so I considered various options:

  1. Continue building (very slowly) with help from friends
  2. Raise venture capital to hire
  3. Enable the Product Hunt community to build the product

While option #3 was compelling and aligned with our “build in public” values, there were too many concerns and risks. Should contributors get equity in the company? If so, how? How would I manage a distributed group of volunteers? How would we avoid group think and make wise decisions?

Furthermore, as a first time founder I didn’t feel equipped to pursue this unusual path. Silicon Valley pulls one to pursue VC funding, a path that’s well traveled and structured. There’s a playbook for #2.

We ultimately raised venture capital and went through Y Combinator (Matt, a YC alumni, helped me prepare for the interview). Even in hindsight, I believe this was the right decision, but I remain curious how #3 might be done today.

The seeds of decentralized startups

I’m reminded of Assembly’s bold efforts in light of recent advancements and interest in cryptocurrencies and the blockchain. It’s clear they were too early and perhaps tried to do too much at once. After all, decentralized startups face several unique challenges, including:

  • Mediocrity through committee design. Innovative products aren’t built by a democracy.
  • Protection against competing startups in a fluid, open market. NDA’s exist to protect IP and combat gaming (imagine if Facebook’s news feed algorithm was entirely transparent).
  • Loyalty of talent. While vesting and exclusivity may be a disadvantage to talent, they’re a feature of centralized startups, incentivizing people to push through hard times. Many successful startups may not be here today if employment was as fluid as the shoes one chooses to wear each morning.

Despite these challenges, today we’re seeing a new wave of people that share Assembly’s mission in various forms, building the pieces that enable decentralized startups.

  • Ellcrys – A blockchain network that will allow anyone in the world start, join or contribute to open source software products and receive compensation for their contributions.
  • Origin — Origin is a protocol for creating sharing economy marketplaces (e.g. Airbnb) using the Ethereum blockchain and IPFS.
  • district0x — A network of decentralized markets and communities. Create, operate, and govern. Powered by Ethereum, Aragon, and IPFS.
  • Aragon — A project to empower people across the world to easily and securely manage their organizations by providing tools for anyone to become an entrepreneur and run their own organization.
  • SDKD — A marketplace for code modules where every stakeholder can retain the fair value of their work.
  • Horizon State — A token-based blockchain voting and decision-making platform that delivers unprecedented trust through the integrity and post-unforgeable attributes of blockchain technology.
  • Colony — Colony is software that helps people do stuff, together.
  • Comakery — A community to build projects together and earn shares in its future revenue.
  • Gitcoin — A platform to enable open source developers to monetize their work when it is used.
  • Bounty0x — A decentralized bounty hunting platform enabling anyone to manage bounty programs, and bounty hunters to receive payment for completing tasks.
  • The DAO — The DAO was a decentralized autonomous organization designed to provide venture funding for decentralized projects but ultimately failed due to a fatal bug.

The future of work

While early and unproven, decentralized startups may pose a serious threat to centralized startups. In a mature market, the former will be attractive to talented people, enabling contributors to choose which projects they want to work on without being tied to vesting schedules or exclusivity commitments and receive direct compensation (and potentially financial freedom) working on projects they truly care about.

The future of work may look wildly different and more global than what we see today.

More Writing by Ryan