The Uber of Venture Capital: An Interview with Swarm Founder Joel Dietz
Joel Dietz is the founder of Swarm, which Entrepreneur Magazine called “a crowdfunding platform that operates on a Bitcoin framework.”
I invited him onto my podcast to discuss what Swarm is, how it will disrupt finance and the 1%, and why it’s the Uber of venture capital.
Here’s the episode, with the transcript of the interview below.
You guys just launched recently, right?
That’s right, on June 17th we kicked it off.
That’s so exciting, and you got a big write-up in Entrepreneur Magazine.
Yea! And we’ve seen a lot of engagement from the kind-of mainstream press which I guess is a bit unusual for Bitcoin things. Our goal was always to engage a larger audience than the ones that are usually involved in the kind of the Bitcoin-type things.
Well, it seems to be working. I noticed on your facebook page, and I feel like this is kind of part of why you are getting a lot of mainstream coverage is because your vision is very articulately communicated. Let me read what you’ve got:
“The vision is to restore to all people the power currently monopolized by the one percent––the power to participate meaningfully in economic life.”
Can you kind of expand on what you mean by that and how Swarm helps accomplish that?
Yea, absolutely. You know, I don’t necessarily have anything against the one percent or anything like that. But there are certain privileges that people have in the current economic infrastructure that I think need to be made widely available to anyone, so that we can all have the freedom to make our own decisions.
And we’ve seen this already a little bit with crowdfunding which has really engaged a lot of people on the idea of investing in things that they really care about, something more than fitting a project into a spreadsheet but really bringing a vibrant community aspect to project building and investing.
That’s kind of the wave that we’re riding. You know, obviously we’re using a kind of Bitcoin infrastructure to do that. But, we want to bring this to everyone and empower everyone so that they can meaningfully participate in economic life. There’s just so many things right now that, obviously if you know anything about the way that big banks work, they have a certain way of doing things that privileges them, and even their regulations have sort of been slowly rewritten to favor the kind of things that they want to be able to do, and that doesn’t benefit the rest of us. So, I really see what we’re doing as restoring power to people world-wide.
In the Entrepreneur piece, the writer brought up two big problems to adoption which is that most people don’t understand the way the financial system works, and that they don’t understand Bitcoin, which are two things that clearly underpin your project. Can you go into some of what’s wrong with the current financial system and the way that start-ups are funded right now, and then how Swarm helps fix those problems?
So, in the United States in particular it’s very very clear that the administration and everyone else said ‘Oh, we really want to allow people to invest in equity.” So let me give you an example of something that is really bad right now. So you have this kickstarter model. It’s basically a donation and you get a t-shirt or something, and there are people, a lot of people who put in to, for instance, Oculus Rift, which is this cool VR goggles thing.
You’ll put in two million dollars in donations basically––some of them got stuff back––but then when Oculus sold a couple of years later to Facebook for two billion dollars, those people didn’t get anything. They took risk, like investors do in a kind of project, but they got no return.
That’s what’s accessible to you and me right now as ordinary investors. And the administration keeps saying “Oh, well we’re going to allow this equity crowdfunding to take place.” This is what the Jobs Act was supposed to do, but it’s taking forever for it to get implemented. Even when it is going to be implemented, the general consensus is that it’s going to have all of these additional regulations attached to it that are not going to allow people to really fulfill the intent of leveling the playing field so everyone is on an equal status.
So that’s something that I think just is a big problem right now, particularly in the financial world. It’s that everything is organized hierarchically, and the higher up you are in the chain, the closer you are with the regulators, and the more favorable the regulations are for what you’re doing and less favorable for everyone else.
So is Swarm the Uber of crowdfunding? Are you going around the regulatory framework?
I think you could say that. I mean we are looking for, very exhaustively, every kind of, I wouldn’t call them “loop-holes” exactly, but everything we are legally allowed to do, or is kind of a gray area, and we are evaluating every single one of those pretty exhaustively.
And not just in the U.S., but in different legal jurisdictions. And we have no intention of violating the law wherever we happen to be, but we definitely have the intention of taking full advantage of whatever kind of things there are to bring what we believe is a very meaningful very positive impact wherever we are doing business.
I think the Uber comparison is a very appropriate one in the sense that a lot of these existing institutions like Taxi companies or whatever are things that have not innovated meaningfully in the last seventy years and Uber is really disrupting them. And I think it is going to be even more sort of “bloody,” not necessarily in a figurative sense but even maybe in a literal sense when these financial institutions, who have been doing business in a kind of kleptocratic way, sort of start to see this disruptive innovation from the bottom up. I know they’re not going to go down without a fight! (Laughs) So, yeah, that’ll be interesting.
It seems to me like a natural audience for what you’re trying to do is the “Occupy” crowd––the people who’ve come out against the one percent, not necessarily against the one percent, but against the system that protects and creates the one percent and inoculates them from competition. Do you feel like that is accurate, and if so what are you doing? I mean, Occupy is probably not reading Entrepreneur Magazine, so how do you reach those people and convince people that? Like with Uber, we are beginning to see a little bit of the social justice crowd understand how it helps everyone, but you still have articles in Salon talking about how it’s “greedy” and it’s “bad,” and it’s hurting the taxi drivers. What do you think of that tension and that potential?
Yea, it’s a massive tension. There’s different kind of factions. I’ve been involved in some of these sort of sharing economy, collaborator stuff, and there’s some crossover between that and Occupy. And, I want to say there’s a kind of “good-feeling” aspect to it and the kind of communal thing where people do it that is really positive, and then there’s also the sense in which there’s sometimes a kind of stasis that comes from any kind of community where it’s like “Oh, everyone’s just been doing it like this forever, and we should just come doing it,” and then anything that’s disruptive is kind of perceived negatively.
And I’m definitely on the side of kind of positive disruption, but I like having the kind of communal aspect to it as well. So in that sense I would say that Uber in particular is a really interesting example. And something that I think will bring something new and unique and positive to the table as well in the sense that, with our crowdfunding model, anyone can participate at a very early stage, and this means that, effectively, you know your users can be your investors.
I generally think they’re doing an awesome thing, but there is the kind of core way the investment works right now is that your investors are these people, and people who are driving Uber cars are over here, and they have different sets of interests. And there’s no real obvious way to reconcile them sometimes. And then, in the kind of corporate structure, the investor interests always win.
You can have really dedicated founders that are really dedicated to the users or something like that, and that kind of mitigates the downside risk, but definitely there’s no way to say “Ok, now all of the people who are driving Uber cars actually own part of Uber” and they’re kind of putting in as they get in and then they get back “Uber tokens,” or a sort of share of the profits or something like that. That would be a really powerful model I think because, not only are those people potentially getting more economic benefit back than they would in these kind of hierarchically organized things, but they’re actually participating in the future of those networks.
But really, and you know someone in our team is someone who worked for AirBnB, which had a similar kind of issue, and it was all volunteer driven, and then it became like a classic VC thing, and then the whole community fell apart. But you know she told me that if this model of Swarm had existed at the time when AirBnB was getting going, that was when we would have used it. Because it kind of has this way of bridging these otherwise competitive interests.
I think for what we’re doing, basically all the Ubers of the future will probably use Swarm. We’re excited to see that kind of disruption that produces this economic thing––that real awesome potential for the people who are kind of doing the real work.
Now, does someone who wants to invest in an idea via Swarm have to be cryptocurrency literate? What’s the technological barrier to entry?
So at this exact moment we’re still doing our own fundraisers, and we’re taking in people who are getting Swarm points and getting some kind of share in our network, which entitles them to future benefits of various sorts. That is something that is really only accessible in cryptocurrency at the moment. Bu we’ve already specced out the plan to move off of that need.
It will always be the underlying infrastructure. It will always be across this distributed network with all of the security and everything else that that includes. But we will definitely not make that a requirement for our users to understand how that works (Laughs).
And I don’t think that even in the marketing or other things and whatever practices… I think we’ll probably de-emphasize any of that kind of infrastructural thing because it’s not really the value that we provide. It’s fascinating, and I love to talk about the technical aspects of it but it’s not really the value we provide to our users.
Ok, and tell us a little bit about your background. What brought you to this place?
I wanted to disrupt finance for a long time. So I kind of started with computer science young and then did philosophy and then shifted back into software engineering. But I always saw these people getting sucked into these I-banks and it was very unclear what kind of value those I-banks were providing to the society at large (Laughs).
So that was kind of this underlying concern that I had, in particular when I saw the history of it. They were just kind of increasingly sucking up people and then kind of spitting out things that were not necessarily valuable.
This was kind of in the back of my mind for a long time, I guess you could say for a long time, but how to come at it only gelled over the last couple of years when I saw digital currency stuff picking up and it took me a long time to actually understand really why Bitcoin was designed the way it was.
So originally I saw this really kind of bizarre and interesting technological thing. And after I really understood the space by spending time in it I really was kind of convinced that Satoshi was a kind of genius, you know in designing everything just right to get these kind of things to work in the right way. So that was kind of a breakthrough for me.
But on top if it I was like “This is definitely the future,” and I was just super excited about a lot of the different technological aspects to it, and I thought that what Swarm is working on is definitely the most disruptive portion of what can be done and kind of how it can be used to create this real positive change and empower a lot of people. I was like “Ahh!” all of the things converge at once.
I am making some money, which I am very happy to do and help other people do, and empower people who were not previously empowered, and do something that is really technologically innovative and interesting at the same time, which I don’t mind at all.
That’s awesome. So how should people keep up to date with what’s going on with Swarm, and how should they follow your work, and how should they get involved?
We have a bunch of engagement channels. Our website is swarmcorp.com, and there’s a newsletter that you can sign up for there so that’s some updates. We also have these kind of Swarm Agents––people who are kind of contributing something on an hour or maybe a couple of hours a week basis or something who just really want to see this model succeed and fulfill the whole kind of potential of it. So if that kind of thing interests you you can join or add one of the people on Skype. I’m jdietz04. You can be added to the skype channel, and that’s where we kind of coordinate the different types of things we’re doing.
There’s always a lot of little things just to give feedback. We had a kind of critical feedback thing yesterday––what we could have done better in our crowd sale and things like that… messaging and now the copy for a video that we’ll be producing that will be available in about a week. Just to, you know, adding some community participation, setting the language and things like that. There’s always little bits and pieces. Other people have volunteered to do Swarm theme music which I’m kind of excited by, so there’s a lot of little things