W3GS: Avoiding Founder “Break-Ups” in Web3
At W3GS, Wei Shi Khai, Eugene Ng, Anthony Cheng and June Olivar discussed how web3 founders can avoid scenarios like Sam Altman’s OpenAI ouster and how investors can help as advisors and mentors.
For investors and founders in a constantly evolving space like web3, a common challenge is making sure they continue to share the same vision and priorities as the project grows. Especially after news about the ouster of OpenAI founder Sam Altman sparked widespread discussion in 2023, what lessons can web3 builders take away to maintain alignment and industry-wide accountability?
At the YGG Web3 Games Summit (W3GS) in November 2023, VCs Wei Shi Khai of LongHash Ventures, Eugene Ng of DWF Labs, and Anthony Cheng of Newman Capital took the stage with moderator June Olivar of Blockceler8 to answer critical questions about leadership dynamics within the web3 community. In particular, they brought up questions and ideas about how web3 founders and investors can foster a collaborative relationship that benefits both parties.
The group explored the significance of aligning goals, providing guidance, and navigating obstacles together such as founder disagreements. The conversation also delved into the experiences gained from managing portfolios, investment strategies focused on user needs, and emerging trends in crypto. Additionally, they addressed topics like changes in board leadership, offering insights into establishing thriving startups in an ever-shifting environment.
In the following excerpt, Shi Khai highlights the significance of effective communication among founders, particularly when divided between different visions for the company's direction. He discusses scenarios where founders may disagree on crucial decisions, such as transitioning to open-source decentralized systems versus targeting niche markets. Eugene also refers to crypto-native boards as a form of DAO governance, emphasizing the importance of establishing a framework of alignment, incentive, ethics and integrity to shape decision-making within web3 companies.
Watch the full recording on Facebook.
W3GS: Maximizing the Founder-Investor Relationship
June (10:48): I'm very curious to hear your thoughts on this. There is a lot of drama recently on Twitter, about the recent ousting of the OpenAI CEO. In those situations, how do you avoid such a scenario? Or do you have experiences similar to that?
Shi Khai (11:09): We're lucky in the crypto industry not to have that kind of high-profile board shifts. But the main challenge you see at the early stage is founder break-ups.
What we see in OpenAI is a very clear difference in vision and priority. Like maybe one side was more towards safety and slowing down, and one side was more, "Hey, we need to get it out there somehow, and then we'll control it."
In crypto, we often see the same thing as well. Some founders might want to say, "We need to go fully open-source and decentralized." And another founder might feel, "No, let's go integrated. Let's go and attack this really niche market."
What we end up seeing is that sometimes it's more suitable that you actually break up and have two different companies and two different directions. Because if you have this tension all the time, and especially if both are unhappy, then it's not going to be effective, right? You're neither here nor there, you're going the middle-of-the-road approach.
And while both directions can work, it is better to resolve it early. And it's better to set it up right when you start, such that you have vesting, you have a clear, aligned mission. And in the case of a break-up, then you know what kind of team resources will be distributed between the founders, or in this case, between the board and the founder.
Eugene (12:33): I think it applies mostly to later-stage companies, where a board is being elected, and I think the takeaway here is you have to elect board members who are aligned with management. I think that's number one.
Number two, I think that there has to be a level of transparency and clear communication between the board and the management. But I think — taking a step back, and I believe the audience here, perhaps, are building earlier-stage companies — in crypto, like Shi Khai has mentioned, we may not necessarily have as many established companies like OpenAI, and I think in the form of a crypto-native board, I would view them as perhaps a DAO governance.
In a DAO governance, you have a council and you elect some members of the multi-sig or council, and it takes a variety of different shapes and forms. Some people call them a council member, some people call them a multi-sig, but effectively, they are all a form of a board member. And I think this again applies to whether it’s crypto, OpenAI, or whether they are a small or large DAO — whenever it involves more than two persons in a room, there will be politics, and you cannot avoid that. And I think the best way moving forward is establishing a framework of alignment, a framework of incentive, and a framework of ethics and integrity as well, that, I think, will shape your collective decision-making.
And I think in crypto, we have seen dozens of DAOs breaking up and even having a position as a DAO but really being more of a centralized organization. So, clearly, I think we're still very early in the, inverted commas, “board” formation of what I think crypto will see in the form of a DAO that I think is maturing as we speak. And it's really something that I'm looking forward to in the years to come.
You can listen to the full recording on Facebook.
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