Posthumous Interview with Joseph Sartre, Curator of Unbundled and Partner at Interlace Ventures
[Editor’s note: This is an Interview with Joseph Sartre, published posthumously. This interview was conducted on February 22, 2022 by Laurence Faguer, Retail analyst, founder of Customer Insight and Retail Expert French Web.
Though it is now a few months old, we at Interlace Ventures felt that this interview accurately assesses how our firm has understood and continues to iterate on our research regarding Web3. We felt that publishing this in Jo's memory was an appropriate way to honor his incredible intellectual curiosity. Unbundled was a project of Jo's creation, and he emphasized the importance of showcasing emerging Web3 technologies on this platform since its launch on February 14th, 2022.]
"Disclaimer! I am very new to this world of Web3, and this world is very young. It is difficult to find experts", said Joseph Sartre, co-founder and managing partner of Interlace Ventures in New York. Not an expert in Web3, but curious about everything. That's his character trait. Jo said: "Thanks to my parents, I grew up in Africa, the United States and France. I went to 14 schools before graduating. This gave me a taste for discovery. Being curious about everything, all the time".
Joseph Sartre: Interlace Ventures, the fund I co-created with Vincent Diallo in 2019, focuses on pre-seed and seed investments in commerce-related technology companies. Interlace closed its first $14 million fund last year - with support from Bain Capital Ventures and PayPal Ventures - and has invested in companies like Promoted.ai and Alloy Automation. We've also expanded our portfolio even further, growing our team and our community.
Joseph Sartre: We are fortunate to have a large number of entrepreneurs, families, corporations and brands from the retail world as Limited Partners (LPs) in our fund. We work very closely with our LPs to keep our founders one step ahead. We share what we see in terms of innovation, specifically in retail, with our LPs. In return, we gain insights and introductions for our portfolio. This focused and verticalized strategy seems to us to be a virtuous circle of value creation - exemplified by our custom Commerce Platform that founders can use to request introductions and have visibility into our network.
Joseph Sartre: That's why we call ourselves Interlace! We are not heroes in the story. The heroes are the entrepreneurs and industry veterans who represent great brands. We are a connection point between the two.
Joseph Sartre: For us, Web3 is defined as opposed to Web 1.0 and Web 2.0. For us at Interlace Ventures,Web3 is not the metaverse, nor is it gaming. It is about organizing the Web infrastructure to be decentralized in its architecture, be AI-driven and based on Edge Computing and blockchain.
Web 1.0 (≿1990-2005) represents the very beginning of e-commerce. It is about interactions from the cloud to the computer. Pages are static, only available for users to access and read.
Web 2.0 ( ≿ 2005-2020) moved us to interactions between the customer and the cloud. This was the advent of mobile-first, cloud-driven computing. In Web 2.0, user data is one of the most important assets. Personal data is owned by the cloud that the customer uses to make a translation.
Web 3 ( ≿ 2020-Present) is a new exchange that is consensus-driven, where interactions are made via decentralized nodes that individually acknowledge and track a transaction. This is solidified with a contract. Customer data is owned by the customer, not by the network that the customer uses to make a transaction.
When did you become interested in Web3 and why?
Joseph Sartre : As investors, we were always interested in the decentralization of blockchain, but we had never really seen adoption at the business or consumer-level.
Something clicked with NFTs (Non-fungible token). All of a sudden, there was an interesting way for a brand to express itself. The part that interests us the most is everything related to loyalty and membership. Because the rules of operation can be different from a classic loyalty program. How can we use this blockchain technology to create new ways of belonging to a brand community, as a consumer? This is where NFTs and DAOs (Decentralized Autonomous Organization) bring technological solutions to the structural problems of membership organization that brands have historically faced.
Joseph Sartre: We built a little MVP internally to figure it out, and we chose to do it on Solana - a channel that's cheaper and faster than others. The MVP we built connects Solana to a Shopify store, and allows a brand to create NFTs and sell them on Shopify.
Joseph Sartre: We learned how to create a gated experience, where we could allow access based on the visitor and based on the number of NFTs they had in their wallet. This is where the notion of membership comes into play: exclusive access (and collaborations with artists!).
Joseph Sartre: There are still a lot of difficulties to bring this technology into our current consumer world. First, every consumer needs a wallet, and today there are 30M or 40M active crypto wallets, which is very little when you put this in perspective of all ecommerce shoppers.
For an online customer, owning a wallet also requires a different mindset, it's a new concept for them. Unlike a physical wallet, there are more questions - Where is it stored? What do you do if you lose it?
And technologically, it can be slow. It is unimaginable to have an ecommerce transaction take 10 minutes, but that's how long an Ethereum transaction takes. We know how much every second counts in e-commerce - look at the growth of one-click checkout companies, for example.
Joseph Sartre: We figured out that it was very easy to set up a gated NFT engine for shopify stores! If we could build it in a few weeks, a team of good engineers could do it much faster. As a result, Interlace invested in Passage Protocol, a company building the future of membership using Web3 infrastructure. It's an interesting time in this universe.
[Editor’s note: In May 2022, Passage Protocol launched a free, no-code tool that allows anybody to build Membership NFTs for their communities. Learn more and join the waitlist.]
Joseph Sartre: This all started in 2014, by geeks. Today it's starting to enter the consumer universe. Last year in 2021, there were $20 billion worth of NFT transactions. This number should be put in perspective, since the market cap of Crypto is $2 trillion dollars.
Joseph Sartre: What I'm really curious about right now is how existing brands are using these NFTs. It's mostly big collaborations with artists, with a communication effect, but small brands are also starting to use them, for membership for example. And what intrigues me, even more, are the brands that were born in the Crypto universe.
Joseph Sartre: The best example is Bored Ape Club, a collection of NFTs that feature profile pictures of monkeys dressed in different ways. Where it gets interesting is that Bored Ape Club has become a brand as a result of this art and what it represents, in the same way that (for example) architect/designer Philippe Starack is recognized as a brand in his own right.
Joseph Sartre: Not anymore. In late January 2022, Bored Ape created a "Bored Breakfast Club“ where you can buy coffee!
[Editor's note: Bored Breakfast Club tokens feature a breakfast scene that includes Bored Ape characters, and each one works like a coffee subscription. Owners of these NFTs receive two free home deliveries of coffee and the opportunity to receive more, if the project is successful.]
There's always the question of whether this is a joke and whether it will grow long term. But basically, it indicates that there are brands and communities building around NFTs - and they are creating physical products. Similarly to how influencers or celebrities have launched their own cosmetic brands.
Joseph Sartre: Another very interesting concept is Friends With Benefits (FWB). Friends With Benefits is a DAO - a kind of digital cooperative that uses crypto-currency tokens to coordinate access, make payments and vote on group decisions. In order to get into IRL events that they organize, you have to own FWB tokens. They want to become the next Soho House - but organized around a crypto universe.
Joseph Sartre: I have a membership and I can trade it, I can sell it to someone if I'm not interested in the membership anymore. All of a sudden, the ‘loyalty card’ - if I use very retail 1.0 terms! - has a value, and that value can change - one day it's worth $100, another day $200, - and it's the consumer who holds that value. The token is a contract, in which it is agreed that a small part of the transaction will go to the consumer, and to the brand.
Joseph Sartre : That's what I'm excited about: will these crypto brands become mainstream brands? Kind of like Supreme was a skater brand, now it's become a global brand. This universe is new. I think we're going to be surprised, all of us, at how this is going to evolve.
Joseph Sartre: The most well-known and recognized brands are interested and say, "We'll test it." I already encourage - and I will encourage - all brands to do small tests. And it doesn't matter if it doesn't work. The market is very small, and therefore the negative impact is very small.
Joseph Sartre: By testing in house. And by talking to; agencies, investors, entrepreneurs. And, by recruiting people who have been in the field for a few years.
Joseph Sartre: There is a real change of mindset to have in the sense that in Web3, everything is decentralized, there is a real collaboration and things must be open, transparent. The purists of the blockchain world have this mindset.
Joseph Sartre: Web3 is one of the three pillars of our investment thesis over the next five years - our other two pillars being Edge Computing, which gives a lot of data to the Web 3 universe and which we think will be transformative for the market, and Conscious Commerce.
On Web3, we want to support the best entrepreneurs who are building a bridge between Web 2, which is now very well integrated at the business level, and Web 3. In some areas, there are innovations that will transform the ecosystem - and we want to be investors in those companies.
[Editor’s note: As of June 2022, Interlace Ventures has invested in 3 Web3 companies]
Joseph Sartre: Ah, no, it doesn't prove anything! We don't prove anything! The fact that we invest in it doesn't prove that it's important. We'll see … maybe we'll be right… At Interlace, we believe that this is going to be an important part of technology.
Interlace Ventures invests in early stage companies transforming commerce to enable better consumption. Find us on Linkedin and Twitter. We've published our investment research on Unbundled, aiming to help ecommerce startups discover new tools to grow faster. This article was originally featured on our Commerce Brief email list. Join the email list. It’s free, and only comes 1x per month.