Launching Generative Ventures, an engaged venture capital fund focused on the machine economy of Fintech, Web3, and AI

Launching Generative Ventures

Hi, Lex here. I am writing today to share the next step in my career and the evolution in thinking about our industry. After 4 years at Consensys, where I worked on tokenized digital assets, crypto wallets and DeFi, macro investing, and token economics, and over a decade in fintech, I remain deeply committed to innovation and the promise of technology in financial services and in our economy.

With that, I am excited to announce that I am building a venture capital fund called Generative Ventures as a founder with several fantastic partners. The thesis is focused on the rise of the machine economy, which is the synthesis of new economic activity accelerated by AI, powered by fintech, and settled on Web3 blockchain networks. Our investment thesis is articulated in more detail below, and I’d love your engagement on the topic.

We are backed by Bertelsmann Investments, the investment arm of $20B+ revenue European media group behind Penguin Random House, BMG, and RTL. Generative Ventures is a dedicated new vehicle for the Web3 industry, and the 6th fund deployed with the group since 2008.

The fund will focus on leading Seed and Series A rounds, looking for companies that can outperform the index of holding Bitcoin or growing AI infrastructure (e.g., NVIDIA). The source of that potential has historically come from positive networks effects, engaged communities, and trustless open-source models.

Network-powered tech businesses grow faster than their vintage peers and are more defensible. Community has proven to be the best way to leverage contributions from stakeholders and achieve sustainable growth without burning marketing dollars, especially when token incentives are aligned. Decentralized networks are clearly more transparent and resilient across credit crises and deleveraging than custodians, like Silicon Valley Bank, FTX, 3AC, or Voyager in recent years of market turmoil.

If you are interested to connect and discuss — just contact me at lex@genventures.xyz or via the form linked below. I am interested in connecting with:

1. companies raising capital
2. journalists interested in the stor
3. funds and incubators building deal flow

The Machine Economy Thesis

Despite the billions of value and millions of users on Web3 rails, many people are still looking for crypto’s magical killer use case. What they fail to understand is that innovation is a process of novelty search and consequent discovery, not a multiple-choice exam with one right answer.

It is okay to not know where things lead, to be lost, frustrated or confused. At one time, it was similarly difficult to see that our mobile phones would control the global taxi network, or that we would swap the physical wallet and our credit cards for Apple Pay, or that traditional media would yield so fully to digital advertising and personalized social networks. Being in the weeds and looking for the way out is the whole point, and only through the practice of doing can we discover what comes next. It is a mistake to think you are not in the labyrinth, just because you cannot see it.

So here is where we are with crypto.

Crypto assets give us digital scarcity and financial abstraction; just like the hyperlinks of Web2 pointed to information and tokens point us to value. Decentralized finance has built a banking industry for Web3, the global tribe of techno-utopians, hyper-capitalist arbitrageurs, and idealistic DAO artists. The digital property rights system works, and its financial infrastructure has been shown to perform better than the traditional, centralized counterpart. And yet, we are lost in hyper-financialization and self-referential ponzi games. Our industry still has a lot of work to do.

There can be no sustainable financial services without a real operating economy. GDP must be generated through productive work and plugged into commerce for utility-generating exchange. People make things and other people consume them. Traditional economies allocate about 10-20% of GDP to their financial sectors, and Web3 should be no different. Some of that productivity will come from digitizing and tokenizing products that address real world demand, integrating legacy economic activity. The rest will need to be built on the Ethereum ecosystem rails.

DAOs already function as the small business sector of the space, creating digital objects and organizing human activity for economic gain. Given the overwhelming macroeconomic pressure on consumer sentiment and discretionary spending, these goods have not yet found a meaningful market. But money cycles come and go, while technological progress marches ever forward, re-organizing society into a digital twin with social graphs of billions of avatars.

We are entering the age of a new machine economy. Humans, software machines, and our ever-evolving hybrids are connected through fintech financial networks and anchored to blockchains. Digital production, powered and accelerated by generative AI, will lead to the creation of countless digital objects — from art and code to goods and services — that form the backbone of economic supply and demand. Crypto has built the money, DeFi has built the market venues, and NFTs have built the commercial packaging for this machine economy to flourish.

The concept of the metaverse, and Facebook along with it, gets things wrong in the short term. It should not be about VR headsets or fashionable internet culture -- these things have been around and do not require blockchains. Rather, the most differentiated frontier is in the economic architecture and financial networks built through Web3. 

Artificial intelligence now adds the capability for machine systems to generate valuable labor at machine scale, to be wielded by self-sovereign punks and their DAOs. Adoption of AI empowers people to build, just like Web3 empowers people to self-custody and maintain privacy and control. DAOs may yet become autonomous.

AI comes with massive risks that must be addressed. Unchecked, it will exacerbate the problems of Web2, leading to infinite addictive dopamine content delivered by advertising firms into our stressed-out brains. The stimulation will never end. Our data, privacy, and dignity will be owned by everyone other than us. Already, Apple scans our faces into deepfakes to be manipulated on video calls in its Vision Pro headset. Who should have custody of this private information?

I am optimistic about the incredible open-source movement in AI, integrating and outpacing the model developments of Big Tech. But we must also use the powers of Web3 to make sure that our information, like the Apple deepfakes, is custodied in our wallets. Just as money has become non-custodial, so must our avatars, digital twins and personalized services.

Web3 wallets should store those highly-trained AI agents as NFTs, to be deployed only with our express permission. The NFT standard will move beyond pictures to software capsules, and eventually to semi-intelligent software robots doing work on our behalf. As they interact with the world as extensions of our mind, they will need the ability to make claims, perpetuate our interest, connect to money systems, and maximize utility. It is clear to me that such things should happen on decentralized, open-source rails with a resilient, digital, programmable commerce and finance capability. No government or corporation should have the power to turn off or censor our digital selves.

As our livelihoods shift further into this world, increasingly more parts of the machine economy will need to be built. Many investors have shifted towards AI for sheer novelty and attention momentum. My thesis is that fintech, Web3, and artificial intelligence are one economic whole, and that our ability to grow each relies on their deep synthesis. 

This conviction has led me to Generatives Ventures, with its strategy set on the novel digital growth we will see from the machine economy. Say hello if you share a vision for this future.