- Jack Dorsey caused a furor in December when he said: “You don’t own Web3. The VCs and their LPs do.”
- On Wednesday, he explained his opinions to Sequoia’s Roelof Botha in a talk on Spaces.
- Dorsey stood by his tweet and urged Web3 to adopt more open-source tech.
When Jack Dorsey, a cofounder of Twitter and the founder of Block (formerly Square), criticized venture capitalists’ involvement in Web3 in a now infamous December tweet, he got a call from one of the most powerful VCs in the industry: the Sequoia Capital partner Roelof Botha.
“I called you to get your advice,” Botha told Dorsey on a Twitter Spaces conversation hosted by Sequoia Wednesday. (Spaces is Twitter’s answer to the audio-chat app Clubhouse.) “I wanted to shape our thinking at Sequoia and make sure we are sensitive to doing what is right by the community.”
For every five investments made at Sequoia, one of them is in crypto, Botha said. In fact, Sequoia on Thursday announced its first sector-specific crypto fund of $500 million to $600 million.
“You have to invest in the open-source community without having any expectation of return for yourself,” Dorsey recalled telling Botha on the phone.
Even the term open source, meaning publicly available code that anyone can freely use and modify, stems from the pursuit of decentralized tech resources that no single entity controls. That’s the same motivation driving many people to create blockchain, crypto, and Web3 technologies, they say.
To explain his point, Dorsey took listeners to his first moments on the internet, decades ago, referencing Usenet, the chat group tech of the 1980s and ’90s.
“I discovered Usenet and found all these weird groups,” Dorsey said. “There was a lot of energy and a lot of posts around how cryptography could be applied to money so that the people own it so that they have an open monetary network, an open system.”
Fascinated by the idea, he learned how to program. “I didn’t really do much with it, except passively learn as much as I could,” he said.
That was until 2009, a year after the financial collapse.
“There was an opening for technology around money and technology around finance,” he said. “So we saw a lot of companies and projects start during that time.”
Companies founded that year included Stripe and Square. That was also the year that the bitcoin whitepaper was published by Satoshi Nakamoto, the pseudonym used by bitcoin’s mysterious creator.
“What really inspired me about bitcoin and the early internet is it had the same sort of energy. It had the weirdness. It had the punk aspect to it,” Dorsey said. “The aspects around challenging the establishment and challenging, specifically, the corporations.”
In fact, his for-profit public company Block has launched an open bitcoin-mining system.
These early internet moments molded Dorsey’s values around open source and decentralization, he said. So when many in the Web3 space marketed themselves as decentralized, he said he felt the need to call out that many companies backed by VCs were contributing to the centralization of crypto technologies.
—jack⚡️ (@jack) December 21, 2021
“I wanted to make people aware of the fact that you have to know what you’re getting into,” he said, explaining his tweet.
He clarified that his critique did not discredit the benefits that VCs could bring to the startup ecosystem.
“I certainly see the necessity, and I appreciate the role of the VC,” he said. “But I think people just have to be aware of what they’re building, what they’re using, who owns it, who controls it.”
There’s some irony in that. The success of Twitter, once a VC-backed startup, helped turn Dorsey and its other cofounders into billionaires.
“I learned a ton building Web2 companies,” he said. “A lot, I don’t like and will never do again.”
Another bit of irony: Sequoia was a venture investor in Square and is a major rival to Andreessen Horowitz, one of the VC firms leading the charge in crypto and Web3 investing. Its latest $2.2 billion crypto fund is one of the largest of its kind. Dorsey’s December tweet set off a public spat with the a16z cofounder Marc Andreessen.
So this discussion with Botha holds subtle meaning: Sequoia and its new fund are aligning with Dorsey, who is publicly championing keeping the next generation of internet tech out of the hands of today’s power players.
One way startups can practice decentralization is through open-source projects, Dorsey said.
“I definitely encourage companies to look at opportunities to hire open-source developers to focus on improving the community, in whatever field they’re in,” he said.
With all that in mind, he still has hope for the technologies coming out of Web3.
“There’s certainly some interesting spirit to it and great ideas,” he said. “But let’s be real around how this is being built. Let’s be real about who owns it. And let’s be real about who has to vote to set the direction going forward.”
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