Jamie Burke is the CEO and founder of Outlier Ventures, one of the first institutional investors dedicated to crypto founded back in 2014. Less than 3 years ago they created an accelerator and have now invested in over 100 startups, a number they are now on track to double in 2022 alone, helping launch several billion-dollar networks and raising more than $250 million in seed-stage funding.
Burke sees technology, finance and culture coming together in the Metaverse, a term that has been gaining traction in the news and conversation as crypto and NFTs are more widely adopted across a growing range of use cases. By the simplest definition, the Metaverse is the layer between the physical world and the virtual world such as the battlefield of Fortnite. Burke believes that the Metaverse represents an economic supercycle that will be 10 times bigger than the kind of growth cycle China brought to global GDP over the past two decades, and he’s positioned his company to be what he calls “the Y Combinator of the Metaverse.”
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Shaun Neff, partner and advisor at OV and the co-founder of Beach House Group, says, “There are so many new companies and I am so impressed with Outlier Ventures’ ability to filter through the noise to find the hidden gems and next billion-dollar companies.” He continues, “I’ve been fortunate enough to work with top talent from Kendall Jenner to Kevin Durant and I can tell you firsthand that celebrity talent and those at the helm of the world’s leading media and entertainment empires are trying to figure out their role in this new economy. I am so grateful to be on this journey alongside a market expert like Jamie to navigate the new frontier.”
Burke recently spoke with Entrepreneur about the existing and emerging opportunities he sees in this space and how he is assembling a network of founders, financial and investment professionals and world-famous influencers and culture makers to make a more open and equitable Metaverse possible. Here are highlights from that conversation.
What is the Metaverse?
“The reality is that if you ask any 10 people investing or building in the Metaverse, you’re going to get 10 very different answers. That is its strength and its weakness. The term Metaverse is rooted in science fiction and has been around for almost 40 years, so it carries some baggage with it. But most simply, the Metaverse is where the physical and the virtual worlds become indistinguishable from one another. I think people get too hung up on exactly which technologies it involves from a hardware and software perspective, like fully immersive VR headsets, for example. I think it’s actually easier to just understand that it is an interface layer between the physical and virtual world, which makes them one and the same but most importantly a shared universal economic system that enjoys supremacy to nations states and their fiat-based systems.”
What is Web3?
“Web2, what we have now, is dominated by a handful of platforms where the user doesn’t participate in the wealth creation. Wealth is captured almost entirely by the shareholders. And you can’t migrate the wealth you buy or earn from one platform to another freely. If you look at gaming, say Fortnite, you could invest three or four years of your life in that game, have spent thousands of dollars, have amassed wealth, be a multimillionaire. You could have a reputation, items, weapons — but the minute that you want to quit, you can’t leave that closed economy. You might be able to find a way to sell your user account in the black market— which is expressly not allowed by the platform — but otherwise, you can’t partially or wholly exit that system. And so effectively it’s a sunk cost, right?
Related: The New Wave of Web 3.0 Metaverse Innovations
So in Web3, you hold property rights to your digital wealth. You can freely transfer and move it between and across platforms. It is a permission-less environment, which means users and innovators aren’t limited by regulations or platforms terms and conditions. Look at Axie Infinity, a blockchain-based game. At any point — without the permission of the platform — I can freely sell any value I’ve earned there. My characters, virtual land. I can sell that in a secondary market to whoever I want wherever I want. And more importantly, I can actually take that as a form of collateral and put it into DeFi (Decentralized Finance); basic borrowing and lending markets on blockchains to borrow against it. If you think about that for a second, it’s pretty insane and promises an entirely new level of financial inclusion to a whole generation of creatives and gamers.”
The dangers of not paying attention to its development
“I believe there is a real danger of thinking of the Metaverse as this far-off destination. We don’t want to sleepwalk into the dystopiaimagined in Ready Player One. I argue that the Metaverse is here and now, and the reason we want to be very intentional about how it plays out is that, at best, it would just allow for a continuum of the way that the web is today. And at worst, it would extend and deepen it especially if you think Facebook Meta’s Oculus VR Headset maps the floor plan of your home and tracks your retinal response to visual stimuli. Like Facebook, you have a handful of corporations that have a monopoly whether it’s social, search, e-commerce, or gaming engines. They control the interface, the experience, they can cancel a user, they can change the rules of the game, the Ts and Cs. They effectively control that economy. So the Metaverse is an alternative economy that enjoys supremacy over any one platform, and in the future, I believe nation-states. The closest thing we have to that right now is crypto. An economic system that is permissionless and enjoys this supremacy, just maybe not in scale yet.”
The Y Combinator of the Metaverse
“It’s our destiny to be the Y Combinator of the Metaverse, the accelerator that dominated the last two decades of the Web, because we’re now accelerating more startups in the Metaverse by volume than anyone on the planet. The kind of scale, rate of growth and period of time between an investment and a listing (for us a token listing rather than a stock market listing) is much more accelerated than Y Combinator. We are talking in some cases months to their decades.
The difference with what we’re doing is that all of these startups are either building on top of or contributing to the same technology stack; which leverages Web 3 into something we call The Open Metaverse OS. So they actually accelerate and compound one another. A startup that goes through Y Combinator doesn’t have this benefit, because they’re all building proprietary technology. They either win or fail. And most fail. Whereas with our portfolio, everything’s generally open-d. And so in the worst case, one team may fail but they have contributed to this shared operating system for another team to pick up and benefit from.
I’ve got huge respect for what Y Combinator has done, but it’s insane it is still working with thousands of founders building web 2 startups: built on shareholder supremacy, closed platforms with moats to trap users and not leveraging the powerful incentive mechanisms of tokenization to help a community to bootstrap a network. Their entrepreneurs are quite literally building in a dying paradigm that ultimately makes them and their portfolio unsustainable.”
The growth of Outlier Ventures
“So Outlier is a partnership not a GP / LP fund. What I mean by that is there isn’t a small group of GPs that manage a bunch of passive LPs money who dictate if and when we realize gains and how much we can invest back into supporting their portfolio. This has meant we’ve never been a forced seller of our portfolio and 99% of any gains that have been realized have been invested back into working with more startups or supporting them with expertise leading us to employ over 50 full-time staff on hand for all their needs. Historically the people who have joined the partnership have been invite-only. It’s been primarily people coming from financial services and capital markets Goldman Sachs, JP Morgan, or CME. People who by virtue of working in banking and capital markets saw crypto coming early and understood it in a financial context. And now as we grow our portfolio, and we are seeing that financial technology applied to media and the creative industries like fashion and gaming through NFTs we have been broadening the type of members we have, from technical founders like Polygon’s Sandeep Nailwal and Sandbox’s Sebastien Borget, to consumer brand experts like Shaun Neff and culture-makers like DeadMau5 and Snoop Dogg and their management teams. So we are kind of bringing together the best from across Wall Street, Hollywood and crypto’s more distributed version of Silicon Valley’s founder investor.”
A unique window on the future
“To pick the 100 startups that we’ve worked with over the last year or so, we’ve had to speak to probably 4,000. So just by virtue of speaking to that many early-stage startups, you don’t need to be a genius to spot patterns. If out of the 4,000 startups that we spoke to, 400 are working on NFTs, and half of those are working on that in art and a quarter in gaming, that’s probably going to be a thing in several months. The goal of being an accelerator is you really need to be six to 12 months ahead of the wider venture market. If you’re too far ahead, you’re accelerating startups nobody else wants to invest in. That’s the sweet spot where effectively we are de-risking investments for the next stage of investors. And with that the startups we work with command a premium; they raise more, more quickly at a higher valuation. And once you get a flywheel going with this kind of platform it quickly becomes difficult to impossible to catch. ”