Kevin Whitmore: Kia ora koutou welcome to today's Web3NZ session on building a strong Web3 startup team. We're very lucky to have Daniel Bar with us. So Daniel is a, as you can read here, founder of Bitfwd Capital and also an entrepreneur fellow at Edmund Hillary Fellowship.

So welcome to Daniel and welcome to everybody joining now. I'm just going to quickly go through some, some housekeeping stuff. So if you do have a question, please feel free to put it in the chat function in Zoom. We're going to make today relatively interactive. So questions during the session are very much welcome.

We are recording this session as well. So just FYI. And we're going to be posting this to the knowledge hub on Web3NZ afterwards. And then just at the end very useful if you can fill out a full survey for us, very quick and painless and that will help us orient our future learning events as well.

But otherwise over to you, Daniel.

Daniel Bar: Excellent. Thanks Kevin and Kia ora, everyone. Thanks for Callaghan for inviting and, and Michelle for organizing as well, the introduction. Let me try and share screen here for a moment.

Okay. Can you see my screen properly? All good. Yeah. Excellent. All right. So yeah, for this session, I think that the best format would be that I'll, I'll briefly introduce the concepts that are guiding kind of my thought process around working in crypto, both from point of view of entrepreneurs, operators, and investors.

And I'll try to kind of just give some deeper insight to some cases. And if there's any questions that come during the sessions, feel free to, I think there's the raised hand like raised hand feature in, in Zoom. And Kevin if I don't see it, then please please make me aware and otherwise we'll, we'll open the open the room for like a more Q and A korero after the slides.

So Cool. I kind of just call it how to Web3 to keep it all around discussion maybe.

Daniel Bar: Super brief background for myself. So, founder of Bitfwd Capital Fellow at Edmund Hillary Fellowship. Before blockchain and crypto, I was working in applied physics, quantum electronics, semiconductors. And originally I'm from Israel and China. And in the last eight plus years, I've been mostly in Australia with a very frequent visit through New Zealand, and spent also a good year or so living in, in Auckland during initial time of pandemic.

Daniel Bar: So yeah, I guess thought about starting from team evaluation, which sounds very much like an investor approach, but actually it's also a good self-reflection check.

So oftentimes at the early stage of startup, the ideas don't matter as much as the people do. Basically, ideas, oftentimes the way I see it is everyone has many ideas every day, right? And it's a little bit like like shit. You can take it and turn it into a fertilizer and, and add irrigation and plant stuff and, and amazing things will grow.

But if you keep just the idea, then it doesn't really matter. Everyone has a lot of it. So yeah, that's, that's I guess like the rational there. So it's important to understand that yeah. You're betting on the people and how do you, how do you evaluate people? Right, so there's this founders trifecta, which Naval is talking a lot about. Naval is a Edmund Hillary fellow, very famous angel investor from Silicon Valley.

The idea is that you want to have the three properties, high intellect, high energy, and high integrity. Now even if you're missing one of them, you are potentially screwed. Basically, if someone has high intellect and high energy, but no high integrity, you're basically working with a crook. Very efficient crook, right?

If someone is very high intellect and very high integrity, but no high energy, then we all know a lot of lazy and smart people, right? They don't get anywhere. And then if someone has high energy and high integrity, but no high intellect, then they, you know, like the, to work in a in a construction site or run an operation like a corner shop is equally hard to run operation like SpaceX, but you have the ability of having specific knowledge and you can get much further ahead.

So this is kind of the rational for how to minimize risks around characters, and that applies both for investors, but also if you're thinking about working with someone as a co-founder or if you're reflecting and making sure that your values are in check and that maybe if you got distracted that you don't get compromised on those values.

Daniel Bar: So I guess this kind of leads to other risk factors and I think that in in startups there's a lot of risks, risk factors that are internal like intrinsic to what you're doing. And there's risk factors that are external and there's risk factors that are more from a like framework perspective.

So when we're looking at a project at a startup, particularly in crypto, there are certain risks that are more special I would say. There's smart contract risk if you're using some defi components to develop a, a third defi project. So you're using composability features, but then you are compounding smart contract risk. And this is something quite common that, you know, we find that there is an exploit or something. It's being discovered that there was a, an oracle that was exploited and then took down that other component in the defi chain.

Additionally, you have things like bridges or exchanges that are practically serving as honey pot for hackers. So if you're running a bridge or an exchange, the scrutiny on your security is much higher than if you were to run something that has a lot less sensitivity to custody issues. The other things is contagion. So most recently probably some of you have heard about the banking crisis in the US. There was Silicon Valley Bank, the, the most big one out of those that were exposed.

It's a bank that I think served probably about 50% of the venture backed companies in Silicon Valley. And additionally there were two other banks that were affected. One, it is slightly less known outside of the blockchain industry called Silver Gate, which turned out that they had problematic treasury management practices. And then they were exposed to liquidity crunch when people tried to withdraw funds. And then there was a third one that was a scapegoat called signature that basically the regulators decided to take them down because they are too crypto friendly. And the regulators in the US currently are a little bit hostile to crypto.

Now, the interesting thing of this story is that this exposed some risks associated to stablecoins. Stablecoins or as, as some like some think about them as a fiat representation. Like fiat is basically government money representation in a cryptographic asset form. So these stablecoins, there's many of them, maybe you are aware of USDT, USDC or, or others.

Each of the stablecoins out there in existence carries a lot of design trade-offs, which hide certain risk factors. Now, in this banking crisis, what we've seen is that because of the fad, fear, uncertainty, doubt around circles, USDC stablecoin, there was a de-peg. So de-peg means that suddenly the value of the stablecoin lost its peg and it was no longer one-to-one conversion between USDC to USD.

So stablecoin risk is something that often can look like contagion because you have so many dependencies in defi products and offering that are associated to that. So all of these, I would classify them mostly as tech risks, and that's kind of like the mechanics of how tech products work in blockchain space.

Daniel Bar: And then quite tightly associated to that is regulatory factors. So if we discuss the, the banking crisis in the US for example -brand positioning, entity structure. So if it's DAO or traditional organization, brand positioning examples is if your brand is something that is potentially presenting a middle finger to a regulator, then it's highly likely that the regulator will find an opportunity to go after you.

We've seen this with anonymizers and mixers last year, and we see it with also the banks that are friendly to crypto and then by virtue of branding themselves this way they're becoming a target, right? And then entity structure. So up until last year or, or maybe 2021, at some point, people thought that DAOs are a great way to kind of like be out there in the ether and not be worried about consequences that are associated to legacy jurisdictions regulators.

Now, while it is true in theory, In practice, it's very difficult to work with this assumption. And we're, we, were seeing a number of court cases that are now basically authorities going after certain DAO members, sometimes not even in their fault. So it's something to consider when you're forming your, your company, your entity and, and when you're engaging in, in team structure in a DAO.

I see some smiles in the room here from people that are familiar with this subject. Yeah. The other thing is yeah, I guess like even DAOs versus traditional organizations, sometimes actually having a traditional organization is a liability and you do want a DAO. So it's not to say DAOs are not good and traditional organizations are good, it's just to say, understand what are the risks that you're exposed to with each of those scenarios.

And then understand what buckets of the operation of the team you want to allocate to which organization. Jurisdiction consideration. So jurisdiction consideration can be, for example, you know, in China, mining operation is banned, so you can no longer work in the Chinese jurisdiction if you're operating a mining operation.

That's, that's one thing. Or if you have a pretty problematic or, or lacking token framework in a jurisdiction, then you would probably not want to issue a token from this jurisdiction. Yeah, these are some considerations. I know that other popular considerations for jurisdictions are tax optimization.

Like if, for example, you're running a, a global fund or a protocol that is interfacing to global audience, then maybe you want to establish the, the entity in a organ in a jurisdiction that is somewhat permissive. Or maybe you would not want to establish an entity and want to have a pure DAO and not want to even like, be directly associated to it.

So there's, there's all those considerations that are very much like, you know, you're thinking about where do you stand in light of regulations, right? And the nature of the service offered naturally. They are very very influential factors there. So that's like the environmental factors.

Daniel Bar: Then venture structure, these are things that I think for the most part have been very thoroughly discussed even before crypto in the kind of rise of the startup era where you see that setting a a good venture structure is something that is very conductive of or, or can be like very helpful for talent, hiring and, and whatnot.

And setting a problematic one can be, killing the project, even if your product is great, and even if you have product market fit and there's demand for your product already. And I've seen it actually in a number of occasion in Australia and New Zealand, where founders that didn't have so much awareness to how this may operate down the track. They, for example, gave a very large share of their venture to an entity that didn't really do so much. And then later when they went to seek for additional capital or they allocated some of the equity to team members, basically people looked at their cap table and said, no, this is actually not investible. I cannot really afford, you know, giving this free lunch to an entity that didn't really do anything and practically is a parasite on your startup, right?

So this is very, very interesting to understand how to structure it and, and best to consult a little bit before making big change in that area. With, with crypto, we see a lot of times where people have this misconception that you can get rich quick if you have some kind of token distribution that is coming early and whatnot.

But in reality, crypto is probably not easier than than normal startups. If anything, it's slightly harder because oftentimes people go out with a token to the public much earlier, and this basically means that they need to operate to a certain degree, similar to a public company, even if not all the reporting and legal obligations.

They already have a market that is active and even more so than a traditional IPO, this is a 24/7 market. So it's like a often time, a bit of a tax on the team's attention. Yeah. So need to really kind of manage the, the incentive from the token inside, internally in the venture as well as outside if you have some DAO contributors and, and other stakeholders on the cap table.

And maybe one example that is worth mentioning because it's fairly fresh and and fairly big, is the FTX saga. So FTX supposedly did everything that people thought is right and they got on their cap tables amazing investors, so to speak, right? Sequoia and Paradigm and, and amazing names. But then it turned out that the venture structure was so rotten or non-existent in some cases where it was practically based on some former of the investors to come into the the theater that SBF (Sam Bankman-Fried) that the founder has staged. And, and yeah, you'll see how it's very easy for these things to then become contagion to other associated projects and companies if they were exposed by proxy.

So yeah, in, in an essence, basically you need to think about both your product, your technology, as well as the environment you're operating in and the business structure in order to like form supportive environment for a team to operate.

Daniel Bar: Some of the business models that we see as Web3 versus traditional web, I think that everyone is pretty familiar with ads business model, whether it's the Google style or Facebook or, or we see quite a lot of it in crypto as well. Or SaaS, which oftentimes is the best recurring payment business model that people choose. Or API or transaction fee based where you basically pay per utility per function call or, or, or node call or whatever it is.

Or then some IT services which are like oftentimes enterprise or, or bigger item tickets. So these are quite common in traditional web economy, I would say. And then there, there's some things that are quite novel to crypto, I'd say. And these are mining or validating, which is basically being a active participant in the infrastructure security layer.

Like right now, if you're looking at the traditional web. There is no active participation in tradition, in in infrastructure security. It's all basically done by big corporations or infrastructure providers, right. With blockchain, and we'll get into like how to measure these things. We have the ability to basically be rewarded for active participation in infrastructure security, similarly, liquidity provision and market making.

So already in traditional finance, so to speak, you could already be a market maker in, in different exchange houses, et cetera. But with crypto and the innovation, particularly around automated market maker, decentralized exchange we see how the whole concept of participating in liquidity provision and market making. Basically making the markets for the capital market activity.

This has been so democratized that you can be very small player that can still get meaningful exposure to upside. And that's basically innovation is quite unique to tokenization in, in crypto technologies. The other thing is, is DAOs and governance rewards. So we already see how a number of the new applications in crypto are basically giving the whole right to govern the protocol to somewhat of an open community.

Now, of course, different projects have a, a different position on the spectrum for how much the participation is open and oftentimes it's less open than it may seem from the outside. But at the same time we'd rather be, you know, pushing and encouraging people to really look at the examples where it does work.

I think that Arbitrum recently launched a governance coin for a very popular layer to network. Had a little bit of a backlash around how they manage their governance and they definitely have some, some room, room for improvement there. But at the same time, I, I think that it's best to, you know, allow for experimentation and encourage people to learn from mistakes and mistakes happen. Like there is no sacred things here that, you know, if it doesn't, if it didn't hit the right spot immediately, then, then it's hopeless.

Yeah. Another thing that is becoming, it's like a little bit still a niche in, in blockchain, but we start seeing digital native public goods, which practically serve as commons.

So I think that actually in, in New Zealand, I see that a lot of time people talk about wellbeing and, and public good in general, and I think that, It's one of those things that is slightly less immediately quantifiable, but it's very intuitively easy to see. When you're going to a country and you are exposed to the benefits that the public good is providing, whether it's the, the roads, the transport, the universities, the hospital, the parks that are around the city, the streets, everything right?

You can tell quite well where are like what's the kind of societal level of health there when public goods are well maintained and, and available and when they are completely absent. And then you know, that there's kind of strong disparity between those that have access to resources and, and those that don't.

So public good in blockchain is something that is also quite hot. And I think that in some sense people think even about the infrastructure layer as public good because it's permissionlessly accessible and yeah, we'll get to discuss more of that soon. So yeah, these are some of the examples of basically where things are very much like innovating in the, in the crypto space.

Daniel Bar: And then you do see that quite a number of of blockchain projects are still using for their business model, the traditional web services economy model. And, and some kind of way to assess it, it's the protocol yardstick or like how much protocolized is the service. And one way of thinking about it is think about a reality check that you can do in order to know how far in the decentralization stack or or spectrum are you.

Today actually, like majority of the so-called Web3 startups are still using Web2 or like the, the business models that is still intermediary and centralized, but they use certain aspects of blockchain tokenization for the sake of user experience. Which is also an innovation, it's just that it's still not very advanced on the spectrum of decentralization.

And two of the properties that I find very easy to measure with one is permissionless, which touches on composability, for example can other products or users use your service, your, your teams project without having to request like, is it composable? They can take it and, and plug it into a new product and basically create some kind of a mashup accessible to places from other countries or other kind of users, without having to ask permission is there any mechanism to gain reward? And by that, basically you are kind of pushing towards sustainability of whatever product you're developing. The other thing, borderless. So are you offering a product or a service that is anchored into a particular jurisdiction or are you not domiciled in a particular jurisdiction and you are basically network state domiciled. A lot of the blockchain good examples I would say are network state domiciled. They don't have very strong anchor to a legacy jurisdiction.

Then are you actually encouraging free market activity or is it something that basically has quite a lot of intervention and policies that are not encouraging of free markets? If there is a nation state actor that comes to intervene or censor is the protocol resistant to that. We see that this is still an area that is quite challenging.

Now, in some cases, you would want some either content moderation or some way to address bad actors. But in some other cases, you see how, for example, a lot of the sanctions list used by major banks today are practically apparatus of the American banking sector to sanction anyone that they deem as potentially competitor. Without getting into politics too much, we see how this feeds into some kind of geopolitical instability in the financial sector.

Daniel Bar: Then measuring the principles that you're running with. So these are kind of like the, the three principles that. For me are principles of operation. One is free markets at the top of the hierarchy, basically. Free markets in some sense are a proxy for truth. They're truth machine. The markets is something that you can't really manipulate to the long term. You can maybe create some short term impact that would be not real, but over the long term it'll look like a ripple in the river. So free markets are essentially this self-correcting kind of tokenized way of thinking about our economic activity as human society. And I think that truth is a very high principle to aspire to, like truth. Truth is not a static state. It's like a moving goalpost that you're always looking to inquire and, and learn more about the truth.

Second is open source as unconditional love in the digital realm. So unconditional love is it's a property that most people that are fortunate enough have experienced unconditional love growing with loving parents, for example. And with with open source, it's pretty much equivalent. You're basically having people contribute their work, contribute code or design or whatever it is, and then people can use it for their benefits and enjoy without having to supposedly pay anything in return. So this is yet another thing that is very very valuable and sometimes hard to quantify in the short term.

And then another measure, which is already closer to entrepreneurialism is reward creativity. So you would find that creativity is being rewarded differently in different spaces you're at, whether it's some jurisdictions or countries that they have economy that is much more open to innovation and therefore creativity will be rewarded more easily. Or you have places that are extremely restrictive, hierarchical, and a lot of red tape, then you'll see that creativity will be less rewarded and you'll see less entrepreneurialism.

So this is kind of the, the three things that you always look at an environment, and if you're a team that wants to work in a certain location, you would consider that is this place conducive of creativity, being rewarded et cetera. Now, I guess like a, a comment that I, I made there is that you can't really have everything ideal. Realistically, there's always going to be some things that are not perfect and investors know that. So know that most investors are actually followers. Very few investors have high conviction and are able to be, you know, contrarian and, and they kind of like come in regardless of what's happening.

So if you know that, then you know that you should be principled, but also be pragmatic, like work with what you have and, you know, optimize for the, the compromises that you need to do without compromising on your values and your ethos.

Kevin Whitmore: Daniel, just a quick question from Will I see he's put it there for later, but we might as well talk about it now.

Do you see a difference between permissionless slash composability and open source?

Daniel Bar: I guess they're very intertwined. Basically when something is open source, depending on the licensing scheme because even inside open source there's different licensing schemes that are more permissive or less. Yeah, there is already a kind of a, a lean towards the permissionlessness. And open, open source I guess it's in principle it's a permissionless technology, right? Like open source work is permissionless.

Does that answer your question? Will? Yep. And of course, this is like something we can discuss in length for, for much more.

Daniel Bar: I guess some market landscape and, and that relates to both where the opportunities are, but also to kind of like, think through examples for each of those have different shades of decentralization, right?

Like if we're looking at the, the base protocols, to a large degree, they are like the kind of most advanced on the decentralization spectrum. But even there you can see sometimes glimpse of Centralization. It is like cripping from unexpected locations. Like for example, last year there was a sanctioned smart contract tornado cash that then impacted a lot of the miners.

A lot of the miners implemented address blocks in order to avoid validating blocks for addresses that touched the tornado smart contract. So this, you can say that is still prone to jurisdictional or, or regulatory risk. And this is something that is at the low level protocol operation, right?

The protocol itself is still immune, but then the few validators that choose to operate the non-censored ones are exposed potentially to risk or they, they need to understand how to run those validators, et cetera.

And then like as you move across the stack, you will see gradually that basically more and more you are kind of working towards a traditional entity structure, and then you are slightly less decentralized in your product, but nevertheless, it's still a part of the decentralization or decentralized web stack. So, so yeah, you see it all the way from base layer layer to scaling infrastructure, data, defi applications and services like media exchanges, banking that is focused on, on blockchain, et cetera.

Daniel Bar: I figured we'll give a couple of opportunities that I think are interesting to work through, both from point of view of like if I'm a team that I'm operating in this realm as well as if I'm an investor thinking about it. So what do people need in, in this space? I guess one of the common things that blockchain is a strong value proposition for is capital movement enablers.

And it's most, it's most well understood in places where there is capital movement restrictions, like for example, China, like some places like South America, you know, when you have a hyperinflation exposure to your economy, then you are suddenly presented with a problem that you're going to have to be able to mobilize money out of that economy and into a potentially other safe haven.

So there's the team called local cryptos, originally from Melbourne that were in one point being one of the most used decentralized application in Venezuela when Venezuela was going through a hyperinflation crisis. Those local Bitcoins both are offering very similar service, which is basically peer-to-peer on and off-ramp for fiat to crypto or crypto to fiat.

Now, most recently, so just this recent month, both of them are being shut down. Local Bitcoins kind of is forced to shut down because there was an exchange that was facilitating transaction for sanctioned people that was somehow not being cleared out of the transactions in local Bitcoins. And I think that they basically figured it would be simpler for them to shut down in good terms without going to jail.

Local cryptos I knew the founder quite well up until about a year ago. He became silent and I, I have a feeling that they are trying to avoid having personal risks and pretty much so what happens with local bitcoins and decided to close before they get into risk. Now, this sounds grim, but at the same time what it means is that there is a great opportunity and now there is another project that is pretty much building their project, knowing very well what are the risks and trade offs that they need to take, how to protect both themselves as a team, as well as the service. And now they're working towards building a new on and off ramp, peer to peer platform. And they're doing it with quite strong intention on much more protocolized rather than service based.

So then again, when you see that there is certain risks, then you would know that probably there is interest in that. And then if if you're able to build an offering that is addressing this need, then you are potentially going to reap the rewards for that. So that's, that's one example. Another example which is a project that I'm advising called CryptoSat.

CryptoSat has satellites in space that are providing cryptographic security applications with trusted computing environment that is isolated from any human being so no one can tamper with it. And this kind of feeds into this narrative of having extra jurisdictional infrastructure where it's practically outside of any jurisdiction, it's floating out in space.

And if the Ethereum blockchain or another blockchain needs some cryptographic services, it can engage with this satellite network. And it does not basically need to eventually rely on being censored by this or censored by that. And this actually just this past couple of days, the Ethereum scaling ceremony, trusted set up ceremony called KCG was facilitated by CryptoSat.

So you see how already there's, there's interest in, in this space. Yeah. And, and these are, I guess, like two examples for how to think as a team on like, what is it that you're offering, how to plug into a particular niche and narrative that, that people want, but also understand that there's like imperfections and trade-offs that you're going to have to make along the way, like realistically to be fully open and disclosed here. CryptoSat at the moment is not yet entirely extra jurisdictional. There's a lot of jurisdictional dependency, but eventually it will be. So it's like, you know, you work with the patches that you need and yeah.

Daniel Bar: That, that kind of sums up and I figured I'll I put some artwork for the korero time. I did a render for the laser kiwi, which any, any one of you probably is familiar with laser kiwi and a Rainbow jet as well.

So yeah, by, in with that, I think we can open to to discussion.

Kevin Whitmore: Very cool. Thank you. I'll start Will, you might want to come off mute if you want to just around your, your question around, can free markets operate in the long term without intervention? So an example, an alliance of markets and the role of central banks like the Fed and stabilizing, destabilizing the capital market.

Anything else you want to add to that Will??

Will: No, no, I, I think that's good enough of how, yeah, free markets have essentially operated over the last over the last 15 years or so. And that we are seeing kind of like the offsets right now, but that's more a question with a recency bias baked into it rather than actually a long term, a hundred year view.

So, but I'd like to to hear from, from Dan on that.

Daniel Bar: Yeah. I mean, the way that I see it, it's a continuum. So blockchain technology and crypto assets are fantastic. Tokenization, technology and, and digital tokenization, particularly when done permissionlessly and borderless and all that stuff, it's practically amplifying free market activity, right?

It's, it's like a catalyst for free market activity. You can tokenize things that previously you weren't able to tokenize. You can include market participants that probably before could not engage. So this is the main kind of pros of it, but free market is not some kind of utopian reality. Free markets are basically a proxy for truth, as we discussed. Right.

And very similar to nature. Like we often like to think that nature is some kind of ideal thing and, and like loving mother earth and which is true in, in some sense truth is the same. Right. You know, in nature you'll have the, the big tree that casts shades on the, on the small tree and therefore the small tree will not grow. Free markets will have these things too.

You'd have this kind of winner takes all scenarios where suddenly someone that maybe otherwise, you know, had a great idea, doesn't have a chance because the winner takes all really progressed there. Or you have also ability to for bad actors to, to find loopholes and whatnot. So all of these things are possible in free markets.

Free markets are not some kind of sacred utopia. It's more about the fact that if we strive to be like to the pursuit of truth, if we strive to that direction, then free markets tokenization and like amplifying free market activity is something that probably will be in the long run has more net positives on inclusion side and on entrepreneurial economic activity side and, and all these things that we want to see.

It'll probably have more of a net positive than, you know, all the things that are otherwise short term can seem quite bad. And you gave the example of of Enron or FTX there, which obviously it's basically bad actor comes and abuses the system. This is something that we've seen before crypto and we'll see during crypto and in the AI revolution.

This, this is something that will exist in reality and the best thing is to just like be as well informed as we can and, and help with whatever education contribution that we can in order to have people avoid as many pitfalls as possible.

Kevin Whitmore: Cool, cool.

Kevin Whitmore: So you mentioned Naval before and, and those sort of three key points around building a, building a team in terms of Web3. Where do people get started though? I mean, obviously those are three aspirational things to, to look at, but when you are, when you're starting out or looking at how to structure something, there's obviously facets to Web3 that's different to Web2 in terms of the distributed nature and things like that.

How would you advise people start their journey in terms of the team building process?

Daniel Bar: Yeah, so I guess it, it strongly depends on the personal background, but oftentimes I see that people like extremely smart people and, and hardworking people with integrity, whatever they want to work in in crypto and they want to find opportunities. Often time, I, I think that it's a good idea to...

Kevin Whitmore: Sorry, we're losing you a bit. It's breaking up. I'll just see if Daniel comes back. Gone entirely. There you go. Fortunately we have him on a, on a WhatsApp group. I'll just see if he's still there or dropped off.

Daniel Bar: Hi guys.

Welcome back.

Yeah. I dunno why Zoom decided to drop me, but we're back.

Kevin Whitmore: Must have said something controversial. That whole question you broke. Started to break up, so maybe we start it again. If that's ok.

Daniel Bar: So question was yeah, about just how to get started your journey, I guess. Yeah, yeah.

Yeah. So it's, it strongly depends. If you kind of never had startup experience, it's great to go and contribute to someone else's startup, and practically you're being paid to learn. Alternatively, if you are kind of feeling the urge, then accelerator programs are quite great environment to learn. It's kind of like a bootcamp for your entrepreneurial journey in real life.

Other places to start. If you're more, more of a, like a, in a learning mode than, than online forums. DAOs, oftentimes they have open contributions and it's quite easy to like, identify doing something fairly simple that would not take too much of your time. You can still maintain a, a full-time job with, so yeah, really depends on your starting point.

And, and then there's many different pathways, I suppose like in, like, I really like the Web3NZ resource portal that you put. There's, there's like quite a lot that it covers, whether it's the specific regional stuff or just generally quite in depth content in in blockchain. And yeah, that's, that's probably a good place to start as well.

Kevin Whitmore: So if I was to summarize as well, you're sort of saying don't over overthink it just start joining groups and, and get exposure through that, that sort of way as opposed to trying to overly structure something.

Daniel Bar: Yeah. There was the famous accelerator from Singapore called JFDI, which everyone knows what's the initial standing for.

It's just flippin' do it, you know, so, yeah. In entrepreneurship in general, like the faster, the faster you move from thinking to doing is best.

Kevin Whitmore: Cool. And we've got a couple of questions here. Any strategies or tips on how to develop mechanisms for testing out those founder characteristics that you mentioned?

So iintegrity, energy, and intellect?

Daniel Bar: Yeah, that's a good question. I don't know if it's something that you can measure really fast because character is something that is revealed through situations and not through some you know a form that you fill and, and you know that if someone clicked the right check boxes, then their character is right.

So to, to answer that, what I would say is that, and this is somewhat of a often a bummer, for example, if I if I am working with a founder or, or investing in a founder, I only do it with people that I know quite well because startups are already hard and the failure rate is quite high. Just by virtue of being, you know, a operation that takes something from zero to one, it's just a difficult task, right?

So then if you can remove the one risk, which is working with bad actors, then rather choose to work with people that you already have verified that they are hitting quite high on all three measures. So that's, that's I guess like for me, but I think that if you don't have the privilege of having a very wide network and whatnot, then oftentimes you see that startup founders are are working with people that they have previous work experience with.

They, for example, work together in, in corporate or work together in a startup, and then, They go to start. So it's just like, you know, you don't have a lot of network, but you already know that there's this one person that you've been through thick and thin, and you assess that, their character is good. There is unnamed accelerator that has this idea of mixing people that wants to get started with with entrepreneurship.

And then by the end of the program, I think eight weeks, you're supposed to start a startup together. While I think that the, the impact on society is positive cause it's exposing more people to entrepreneurialism, it's a way that I find almost impossible for people to truly assess each other. Cause two months in an artificial environment under pressure to, to find a mate, it's like, that's not how you get married. Right.

So, yeah, like to me it's like you really just have to find. Position yourself in enough environments that you will know the integrity and intellect and energy of the people that you are going to work with. Yeah, you have to basically, you have to verify it as best as you can.

Kevin Whitmore: Yeah, I was going to say that sounds like married at first sight, doesn't it?

Kevin Whitmore: Another question, integrity check usually only shows under stress or moral dilemma. So how to separate the talkers from the walkers. And I think this is a, a good example with the FTX original claims around being charitable and then afterwards revealing that it was pretty much just a marketing gimmick.

So any, any thoughts around how to, how to validate integrity?

Daniel Bar: Yeah, I think that the, it's true. Like basically, That's why, as we mentioned before, situations reveal character, right? And when someone goes through hardships, then you know that the way that they went through it is very revealing, right? Like I think for example, Coinbase, unlike FTX, Coinbase has went through a lot, right?

Like they've been the darling of the regulators. They've been the most hated exchange by regulators. They've been through everything. And you'll see that they are very persistent and principled in, in how they run their activities and what are the kind of trade-offs that they are okay with and not okay with.

And yeah, I think that to me, for example, over the years, the appreciation to Coinbase has grown a lot based on exactly that. Like how do they navigate going under duress, right? So yeah, you have to kind of see it through the situations and you can't like avoid that.

Kevin Whitmore: Cool, next question. Bridges and on-ramps into crypto are becoming more and more valuable, you've mentioned. What are some of the other trends in crypto that are becoming important throughout the stack?

Daniel Bar: Yeah, I mean there's, there's a lot, and I would probably say that one area that is totally not really tapped is the, the kind of merging between AI and crypto.

Like, I remember that in the early days of smart contracts, people would characterize smart contracts as some kind of AI. Cause you have this machine that is, you know, receives inputs and spits, outputs a smart contract. But I'm thinking something a lot more closer to sentiency that, that we're seeing now with the early language, large language models. Right.

So I think that finding a way to give applications, more context, and maybe even like helping users with context is something that is maybe totally untapped and, and has a ton of value, right? Like there's so much asymmetric information in crypto that if you're able to shed more light, and we're starting to see, for example, nonesa is a data product that uses machine learning or Deep DAO another project that I'm advising.

Those projects that kind of visualize data in a way that can give people more insights, get a lot of value, and, and I think with AI you can potentially look at all that going to a whole other level, like giving people a lot more context than only data visualization alone. So yeah, that's, that's one area that I think would be interesting to see how it's developing.

Kevin Whitmore: Cool. Follow up question on founders. Any ways to test it out faster? Start with smaller scale projects before going into the big ones. Question mark.

Daniel Bar: Yeah, that, that's, that's a very daoist approach actually, I'd say. Basically DAOs, the good thing about DAOs, because we spoke mostly about the risks of DAOs so far, but the good thing about DAOs is that there is one, one kind of a voice that always echos in my mind when I think about DAOs, a good friend of mine, which is the founder of the first DAO in existence, I think called bid shares.

This is kind of, I think predating maker DAO even. It, it's, it's those DAOs that really understood what does it mean to provide some products to, to a growing financial markets ecosystem. Crypto, right? And, this friend of mine, he, he told me this quote that like keeps repeating in my mind is DAOs are an inevitable product of the startup era.

Now, if you think about it like the startup era we're, we're in, right? It's basically this environment that small players can come and challenge big incumbents. And it's encouraged, it's like encouraged to come and move fast and experiment and like break things, all that stuff, right? And to a certain extent, DAOs are basically taking it to a whole other level.

You have this entity that is basically people can go in and out of, like they, they are a lot less restricted with how they contribute to DAOs and they can make a lot of impact. So you have this like loosely associated group of people from all over the world that can then collaborate on projects together.

And then it's a great environment to start understanding. How your collaborator from somewhere else is functioning because you are, you'll get to know them through this like a small project in the DAO and then over time you see how oftentimes daoists that work together in the DAO, similar to how people would work together in a corporate before they end up spinning their own project, right? So you kind of like find out about character of the people through collaboration.

Kevin Whitmore: Awesome. Just conscious of time, what we're going to do is we're going to wind up the first part of this session here, so the 60 minute session and just thank Daniel for his time to date. So for those people that only have an hour feel free to drop off. Otherwise, we're going to stick around for an optional q and a.

So obviously we've been doing q and a already, but we're just going to have another, another 30 minutes. So for those people that want to hang around and continue the dialogue, feel free to do so. Otherwise, I'm just going to pop up a very quick slide here if you want to, if you want to grab your your phones and just snap that QR code, that'll take you to a notion form.

This just helps us orient our learning series events. Gives us feedback on the good bit, the bad, and the ugly in terms of changing the timing to suit people, et cetera. So if you could figure fill this out, that would be much appreciated. And we'll just take a little bit of time for people to do that and I will pop the chat, separat, sorry, the link separately in the chat in a second.

And we will then just jump into a 30 minute q and a.

Daniel Bar: I actually also have some questions for, for audience if possible. I think while there is some kind of there is some tension between the, the borderlessness of crypto to at the same time thinking how do we create regional excellence or things that are encouraging in a particular region. So I have my own opinions and ideas for what does Crypto Web3 mean for New Zealand and Australia, and also what does New Zealand and Australia have that is unique to bring into Web3?

Some of it is already validated and some not, but I'm, I'm curious to what are the things that people in today's session believe are kind of unique in New Zealand and Australia that, that we can already compete globally with, and what are the things that still need to be strengthened in the region that that we can work on?

Kevin Whitmore: Yeah, good question. Anybody want to come off mute and answer, answer that one. What's unique to New Zealand in terms of the Web3 context?

Will you must have thought of thought of this before. What's, what's different?

There is the Treaty of Waitangi that's been brought up. Oh yeah.

Daniel Bar: Yeah, actually, I, I became to hear from Lawrence more on, on what, what's the way that you think about it if you're if you're keen to talk.

Kevin Whitmore: You want to come off mute, Lawrence?

All good. No worries. Yep. Cool. Yeah, I mean, Treaty of Waitangi definitely, definitely one. I think obviously also our, our location in the world. I mean, from my perspective that that makes us more prone to digital solutions in terms of interacting with the rest of the, the world. So that's, that's one thing.

We do seem to have a very competitive education system in terms of producing talent here. Obviously we'd always like more of it. But we're constant, constantly being requested from overseas for teams of people to participate. Not necessarily in just Web3, but also SaaS projects as well. So that's, that's another thing that's a, a global talent shortage, which is obviously ongoing.

Yeah, and I think also from, from a DAO perspective as well, there's lots of stuff going on here, which we are naturally attracted to, and that's, that's technical and non-technical people.

Daniel Bar: Yeah, I, I totally agree. I think that some of the early tech companies that really succeeded in both New Zealand and Australia, like if we think about. I guess Xero or Atlassian these companies. I think if you look at what are those companies delivering, then it's, it's very digital. It's, it's like a very software heavy, it's not so much like a hardware or, or this sort of nature of operation.

And I think it's, it's very much in line with Kevin, what you're mentioning about, you know, the location in the world kind of forces internet native innovations. And that mentality really fits in well with crypto, I feel. And then add to that, and this is somewhat of a unexpected byproduct, I feel both in Australia and in New Zealand, I find that people play a lot of money games and most of it is exposed to the property markets.

But in general, I think that the, the average financial literacy in Australia and New Zealand is quite high. Like generally people are very well aware. And then you couple that with the motivation to innovate in a digital native realm. And I think that all of the tokenization and capital market tilt that crypto has is very, very attractive for people from this region.

And I think that particularly with....

Kevin Whitmore: Losing you again. You've gone low. Low connectivity. I think you're back now. Yep. No, it's looking better now.

Daniel Bar: Yeah, I came back. I'm going to need to complain to Elon Musk about the quality.

Kevin Whitmore: You're back again. I was just going to say my last point was also the other thing local here that I'm seeing more of is the, is the tinkering with sort of grassroots stuff. It's starting to become a lot more prevalent. People are quite willing to break stuff and go back to that kind of in a, in a shared mentality of trying to rip things apart and recreate them with using open source software and, you know, existing payment terminals and the technology that's out there. So that's definitely something that I'm seeing more of as well.

Kevin Whitmore: We've got a question there. Are we going to have enough Web3 tech talent in New Zealand as we build more as blockchain becomes mainstream?

And I think that feeds into the previous question around thoughts on the lack of Web3 and blockchain exposure in New Zealand universities. I mean, that's a, that's a good question and also be interested in that in terms of comparing it to what, what other countries are doing in that space, whether it's just New Zealand that's lacking or it's lots of countries that aren't up to speed yet on, on some of these technologies.

Daniel Bar: Yeah, I think that maybe like to address this question, one way of thinking about it is, Talent attraction in general. And in, EHF, a lot of Edmund Hillary Fellowship is, is about talent attraction, right? But if you think about it, this is something that is very, it's like almost intuitive and common knowledge for knowledge worker migrants.

Because knowledge worker migrants can basically go to almost any place in the world and find great life and great opportunities. And I think that something that oftentimes is not really well understood in government level is that to an extent the Cold War involves talent attraction. And basically the economies that are going to be able to attract global talent are going to do well, like better off for the long term.

And this is something that I find. On the one hand in, in New Zealand and Australia, you do have the point system and, and different migration pathways. But I often feel like it's very, very conservative and it's, it's quite quite outdated. Like EHF is probably one unique experiment, but if you think about it in the grand scheme of things, it's very small number of visas.

I think that making it much easier for people to migrate, like particularly if you want to encourage certain talent, skill yeah, like I, I would, I would look at something that is a lot more permissive, basically, like quite a few countries have digital nomads visas and, and benefits for if you bring capital into the country.

Sure. There is like a, a kind of delicate balance to strike there with, you don't want to be captured by foreign entities and, and whatnot, but at the same time, you do want to be an attractive environment for entrepreneurs to come and, and reside and operate in.

Kevin Whitmore: Yeah, good point. I think also the tax structure as well doesn't set itself up very well for that type of mobile person as well.

A lot of, it's sort of very much around that physical location, PAYE based in a specific country. And, and coming up with sort of a structure that kind of takes into account those movements a little bit more.

Kevin Whitmore: Are you seeing anything like that overseas or we talked about the, the nomad visa and, and, attracting people there.

Are you seeing anything that, that kind of sets the bar high in the tax space?

Daniel Bar: I think like on the nomad side, probably Southeast Asia is in our region. Southeast Asia is the most progressive in that regard. Like whether it's the Malaysia has a digital nomad scheme, I think Indonesia has one and like these are great environment to work in with regard to tax, it's always very controversial topic.

And I think the one place that is very progressive in experimenting is El Salvador. So they just passed this bill where I think that they pretty much waive any tax to crypto assets associated activity. And and I know that like oftentimes that the whole El Salvador situation is a bit controversial cause some people say that the president is a little bit of a dictator. I'm not aware of Latin American or Central American politics, too much to know. But I definitely think that it's it's a step forward to innovate on that. And in general, like adding anything that is slightly less exposed to jurisdiction-centric thinking is a good thing.

So yeah, like taxes is a subset. It's like one issue there that is definitely important. And as a Will pointed out there, it's it's very it's very true. Oftentimes, like tax optimization is being centered in those islands like, or, or offshore activities like Caymans, British Virgin Island, Gurnsey, Isle of Man.

I think that Singapore did quite well in balancing between, on the one hand, kind of really taking care of public good and, and making it a lively place as well as attracting capital globally to become financial hub. So, yeah, that, that's, that's probably like the best example. They have pretty low, I think that they have actually 0% capital gains tax, if I remember correctly.

At least for most of the asset classes. And a lot of investors choose to move there. Also because of that reason, I wouldn't, I wouldn't generally think that moving to a place just because of tax reasons makes so much sense. So I, I would imagine that, you know, if New Zealand comes with a fantastic tax regime for crypto, this would be epic.

Yeah. The, the New Zealand has 0% capital gains meme is something that I heard before coming to New Zealand and, and I discussed with a number of lawyers and accountants and I learned that it's slightly more nuanced than blanket capital, like blanket 0% there. But yeah, it's definitely better than say Australia in, in the US and, and other places.

Right. So yeah, I think that like the US is starting to, you really see how the US is starting to become less dominant and, and less relevant in a world that is driven by permissionlessness and, and borderlessness because, yeah, like the, the financial regime there is quite hostile to innovation because they are too comfortable being kind of fenced from any competition.

So I think that this is probably going to be a very big shift to Asian centric financial era at the moment, just because they understand a little bit better how to play that at the moment.

Kevin Whitmore: How would you, what were the main differences that you can see in terms of software or dev teams in the Web3 space versus Web2 and to, just to nuance that, you know, obviously in, in SaaS businesses and things like that, it's, you know, there's a lot of talk about agile, scrum, co-location of teams, all that.

A lot of that goes out the window when you have a distributed team, especially on open source projects, et cetera. Is there anything in that kind of sphere that you would advise people looking at a Web3 team to be aware of, like, like similar things to Scrum or Agile for Web3? Or is it just another JFDI type answer in terms of getting on with things?

Daniel Bar: I think that a lot of projects in crypto actually operate very much in a similar way to what you described there in, in Web2, like Agile and Scrum is just a working method. It's very, very common. But at the same time you have, you do have those like extremely loosely organized projects that have on the one hand it's more of like a JFDI approach. On the other hand, you see very often the tyranny of structurelessness and in organizations that don't have good methodology to produce output it's very easy to be captured by whoever is slightly better at greasing the system there.

And that's like common in DAOs that you would have from the outside it looks like a decentralized organization. And from the inside you actually have kind of a allegiance to the dictator of the DAO. And if you are going against it, you'll be out. This is quite common actually, sadly, but it's quite common.

What I do like seeing in, I wouldn't say that it's restricted to crypto, but in, in good crypto projects, open source culture can oftentimes really shape the the kind of methodology as well, right? Like, for example, there are teams that everything that they do is public. They basically don't have any private channels.

They build in public what's called, they use GitHub or, or other git methods to follow on issues. If there's things that are even not just code developments like design or marketing, almost everything is basically like discussed there in public. And the interesting thing about it is that the rational behind it is to push toward tokenization of contribution versus reward.

When you're doing almost everything in public and digital native, you're able to see much more easily whose contribution made more impact then generally who is truly contributing and who's kind of not really there and, and just like officially carries some formality, right. So, so yeah, I think that open source culture is probably like the, the main thing that is slightly more pronounced in crypto startups, in, in many crypto startups, not all of them, but compared to Web2, that is slightly less common to find open source culture.

Kevin Whitmore: Okay. And then probably similar question or similar type of question just in terms of rewarding or remunerating teams as well, things to look out for in the space. Obviously there's a plethora of different ways and tokens and, and, and things like that. Is there anything you would sort of advise around or things to be aware of that are Web3 specific in the remuneration space, like standards and things like that? I mean, obviously, you know, how to award bonuses would be a sort of a, a traditional SaaS question as well. Anything like that in the Web3 space that you're aware of?

Daniel Bar: Yeah, so I guess incentive structuring is is very like, it's, it's very deeply understood already from before crypto.

I'd say just like how to structure ESOPs for example. All these same things apply to crypto. Like I don't see that that there's too many shortcuts to be made. The only thing that is maybe slightly different or exception is that when you are working in existing DAOs, then you do have the ability to think about, you know, like if you structure ESOPs, usually it's like a waterfall.

It's like you can't do a better ESOP for people that joined much later, unless they're like, you know, bringing some unique impact and, and whatever. It's very uncommon. With DAOs, oftentimes you have this ability to basically rethink it as you go, right? Like there's a number of DAOs that I saw were rewarding early contributors, and the landscape has changed.

The contributors have moved on, and then they basically terminated their their contribution with, with permission, like with discussion. But these were, these were good example, right? And then it basically allowed the DAO to have a little bit more breathing room to kind of find its new narrative in the changing landscape and kind of structure, not exactly an ESOP, but like a new token bonus reward mechanism. Right.

And you see it in, in the good DAOs, like I think we mentioned in discussion of how to reveal characters, right? So the good DAOs, they get through challenges and you see that they managed to resolve their, if they had token structure that was not great and they managed to decapitate it and kind of start a fresh while respecting whoever was there before.

Yeah. It's like, it, it allows more flexibility, but it's not as if you can completely shortcut the, the whole thing. It's, it's important to get these things right.

Kevin Whitmore: Cool, cool.

Any other questions? Feel free to come off mute, otherwise I'll keep asking mine.

All right. One more. So one of the big topics here is access to banking services. Is there any, have you seen anything that's, that you could, I guess, advise companies look at when they're trying? I mean, especially in the Web3 space, it, it, it draws attention immediately If you're mentioning anything to do with crypto and blockchain and things like that.

Have you seen any successful examples of Web3 businesses that have relatively solid access to banking services or are most of the ones that you are seeing at the moment also sort of dealing with this at the moment?

Daniel Bar: Yeah, it, it really depends on the scale of the operation. Like, for example, we mentioned the banking crisis in the US. So I, I'm a client, like I'm an institutional client of Coinbase, for example, and I could see that they emailed their clients during that week several times when they had to change their banking route because two of their banking partners got shut down. Right?

So at the scale of Coinbase, you are able to have so many banking partners at your disposal that you'll be prepared to change them if need be. But having worked towards getting banking license, like banking partners it's, it's quite a lot of work for institutions and particularly if you're facing retail.

And I do know actually of New Zealand companies facing retail that, that struggle with that all the time. Yeah. It's, it's definitely one of those painful points for how to kind of migrate from traditional finance world to crypto. One of the things that I'm hoping for is that we will see a lot more peer-to-peer innovation there.

So like most of the peer-to-peer on-ramps and off ramps are, are retail focused. One of the reasons I'm specifically excited about the open-peer project is that I know that they're thinking about it not as some kind of a retail project alone. They're thinking about it as, you know, stepping stone toward eventually building something that it's a lot more resilient and not, like, not kind of like following that traditional fragile banking partnership between crypto client and and a bank.

There's no like it's an evolving situation cause basically the way I see it, currently America is hostile. I already discussed just this past two weeks. Like I met with one bank from Switzerland and another bank from Singapore. These are both banks that were formed in the last two years, and they're basically focused on blockchain, on supporting blockchain companies, right?

So I think that wherever you have like on the one hand crackdown or like a rough regulatory environment for banking partners, you go to another location and you will find people that identify this as an opportunity. So yeah, just like keep an eye there for, for that. I wish that New Zealand was a good banking environment for blockchain and crypto.

I wish I could say that, but the New Zealand and Australia banking environment is very, very conservative, I'd say. And I don't see how this will be changing very soon. Like I think that Australia and New Zealand in that regard are Yeah. Are not a different here, sadly. Yeah.

Kevin Whitmore: And I think that's potentially why there's also discussion of what are the, what are the next levels in terms of crypto native economies where it sort of goes beyond banking service access and things like that. But obviously that's an evolving topic as well.

Kevin Whitmore: We've just got a couple of questions here.

Favourite Web3 VCs or any VCs that you would recommend people talk to?

Daniel Bar: I do like another couple fellows VC called Paradigm. They're they have pretty good research team. They've done quite well on contributing to the ecosystem. So this is like one of the firms I like. There's the VC firm that I, I was a partner in until until a couple years ago in Israel that I like called Collider Ventures.

Who else is favourite? I actually look, I can't really say favourite, but yeah, I guess it's, it's people that contribute with research and open source community. These are the, the kind of firms that I would look at in general. And, and yeah, there's some of the kind of tier one, so-called tier one crypto VCs that I'd actually deemed them as, as bad actors even. So without naming names, basically you really want to make sure that that there's yeah, like good value system for the firms you're bringing on board.

Kevin Whitmore: Well, I'm all out of questions. Has anybody got a final question for Daniel?

Otherwise we might wrap it up there. Yeah. So very much appreciate you taking the time. So thank you very much and yes, if you've got any more questions, please send them through, we'll answer those separately. Otherwise we're going to post this video and the transcript to the knowledge hub later on.

And thank you again for joining and thank you again for, for Daniel for taking the time.

Daniel Bar: Cheers. Thanks a lot.

Kevin Whitmore: Great stuff. All right, we'll leave it there. Thanks a lot.