IP Expansion through Blockchain Infrastructure | KBW2023

[Music] can you guys hear me testing nice to be here appreciate you guys coming out um maybe we can start with introductions TJ do you mind starting and introduce yourself yeah sure so I'm TJ uh I'm the co-founder and CDO at every realm we're a holding company that invest and develop social video games and Virtual Worlds I'm Carlos um I'm a partner at bcra we are a leading gaming fund we invest in video games interactive entertainment content infrastructure around it um been around since 2016 and been investing in blockchain since 2021 um so I lead the crypto efforts at bit craft Andy Albertson I'm a corporate lawyer at Fenwick uh so normal Law Firm but what we do that's different is we work with Builders creators to Divi design complex systems so gaming systems defi systems centralized decentralized exchanges uh roll up our sleeves and help people build and uh navigate the global Regulatory and IP tax Securities landscape and I'm Yoni hgos I'm with future Co and we're a talent and culture based business that focuses on providing modular infrastructures and solutions that uh develop protect and create uh new IP um TJ do you mind telling us what your company's doing as it relates to blockchain and IP and what you're focused on yeah so I think you know cont cont in IP is everything um in Social video games you obviously have the developers making content but without the creators um you have nothing so in in order to really protect them um you know I think IP in the blockchain is needed transparency is needed um and that's what we're doing with uh blockchain and our social video games cool Andy as a corporate lawyer uh what's your firm working on and what how are you guys focused on kind of protecting creators or developing IP yeah a lot of it depends on the model right right so we work with everything from a system that's going to be a completely open- Source system so thinking through open source licensing strategy pulling apart the technology stack maybe there's an application layer that's going to have a different one you could think about ugle Labs as a model right you've got apoin on one side that's an open ecosystem we're building and then you've got the metaverse and gaming everything else they're building on that side so whether it's arbitrum that's an open source system to more of like a heavy application layer model the IP strategy is going to vary you know distinctly between those two types of system designs Carlos you guys are a fund right so from a from a Investor's uh uh point of view how are you guys looking at IP and blockchain um we are active investors in content uh so we invest you know we're one of the more active investors both across series C and series a on games um and they may be AAA more complex games things that are simpler mobile friendly midcore casual user friendly um and we think a lot about IP in all of these things because as as TJ said without IP there's no there's no game right people show up to engage with IP they love um and games are built on top of Ip that people love um as it relates to blockchain uh for us uh the idea of allowing people to be entrepreneurial in games and giving digitally native property rights as part of digital worlds is what will form the basis of Entrepreneurship um and lead to a different uh Vector of growth on top of games than what we can see today um and so we're we're imminently focused first on underwriting and picking great IP um and then on the infrastructure that allows people to flourish on top of that IP and have true entrepreneurship on top of it I think that's a great point you know one of the things that we work on at at Future Co is really this notion of owning self right all the all the kind of pieces of yourself that are generally being distributed whether it's your user patterns your Spotify or your Pandora or your Uber or your you know uh uh whatever it is right and so I think this notion of people owning every piece of themselves that is generally being monetized is is really important from a from a challenges standpoint what what challenges are you guys seeing and solutions that you guys have developing to kind of get around the challenges of blockchain right it's a new technology the legal system is is not developed fully yet right there's a lot of Regulation issues so from a challenges standpoint what are you seeing TJ yeah so I think even if your content is on the blockchain there has to be standards that you know it's recognized that you actually created that um so I see that as an issue um I think it could be on the blockchain but then how do you enforce you know licensing fees royalty fees Etc that's still very complicated and needs to be figured out um but the things and pieces are there I think different companies are working on cool solutions for this but largely um a lot of things are still missing I would say can I jum so one of the things that just to add on to what you were saying there is these challenges are really opportunities right so people are scared by these opportunities by these challenges because of the regulatory uncertainty and so often times it is that strategy that can give you an edge in the market so for example I if if you're pricing a company right most of these people up here are investors if you're pricing a company you can have those margins and that growth and you're baking Bagels the valuation is going to be a number that's greatly Superior to a company that's taking on Industrial risk iic risk on a global basis so when we're helping companies think through coordinating with investors and pricing these deals you price that risk into the model and what we're doing from an overall perspective is drisking it that's right for that entrepreneur and so these great investors that come in they partner with the company roll up the sleeves come with valuations and strategies to give that market opportunity in this gray area so I think the really smart entrepreneurs and business teams that we support they froth at the mouth at the gray area they don't run from it because it's that gray area that is a business opportunity that other people just run from because they don't have the courage intestinal fortitude to do it whether you're an entrepreneur or cutting a big check to me I think the biggest challenge is is mindset right I think 10 15 20 even 40 50 years ago IP has always been a singular asset right and I think with blockchain technology we have to start thinking of Ip as Community assets right more entities will own IP right users will own IP as well right Brands creators there'll be multiple layers of ownership and I think that's a that's a paradigm shift that we have to kind of get to yeah no I think you know right now the space traditionally is very fragmented based on jurisdiction based on different rights now that you tokenize it those rights are bundled I can you know license off uh t-shirts I can license off display or different right uh rights so I think you know once it's tokenized there's a lot of ways that you can streamline that process and also make it cheaper for a lot of these ENT entrepreneurs um to monetize their Creations as it relates to kind of public versus private blockchains what do you guys seeing um in general public blockchains are more attractive for building ecosystems that are open to a lot of different people participating in them a private blockchain um it's unclear how much Innovation it brings forth uh versus just I don't know doing any other type of technology that isn't a blockchain um so in general private blockchains I think can be interesting stepping stones for people to to build on top of it or or you know for for a company to dip their toes into dealing with crypto um but I don't really think it's truly crypto uh unless there's a very easy bridge between that private blockchain and a public blockchain um or it is build on on top of public blockchains to begin with um so in general uh we're not really spending time on private blockchains um but you know I I respect respect people who dip their toes in the water there first um and I hope that they get public eventually yeah and i' I'd add I'm not interested in private blockchains right they're they're not they're not interesting and it might be an oversimplified heris but I think of them as like the corporate networks I'm not super interested in the Facebook Network or the Twitter Network or some of these other just the the app store for Apple right those are corporate networks with a massive take rate the future of the internet and what we're building as an industry is going to be these open system designs that democratize the builders and aters on this neutral infrastructure and so when I hear the term private blockchain just I again maybe too simple but I think of the App Store at Apple and charging a 30% take rate to just communicate and to sell your product into a market that that is I think the history and where we're going in the future I think all modern system designs can be built on you know neutral infrastructure not even the cliche sort of credibly neutral infrastructure legitimately neutral infrastructure that entrepreneurs can build on transact peer-to-peer value on a global basis and that is just clearly where we're going there's going to be some bumps in the road but that's the path that we're on yeah I think that's a good point I think the the fragmentation right private versus public this jurisdictional fragmentation of of blockchain leads to kind of the question of what do you guys think about the how blockchain can help us develop a global kind of standard right or at least not a thousand different standards right of of Ip ownership um distribution of Ip assets whatever it is yeah right now you know as you said it's really fragmented um United States you have the US PTO and different countries I'm sure you have different organizations so if it's on the blockchain it's transparent anyone can see it anywhere um so I think that's a really important part of putting IP rights on the blockchain for sure I mean Tech tends towards standards um the same way that the internet has coalesced around you know w3tc and and sort of you know what are those standards um I it would make sense that that if we have technology that is cu like a lot of people talk about like open source and and and like open source has been great to technology generally because people have figured out how to build on open source composability goes One Step Beyond that right it goes beyond just anyone can use this piece of tech into different pieces of tech can talk to it the moment that you have globally distributed standards and composable standards it makes it a lot easier for everyone to understand the ground rules of how to interface with the system so for us you know a lot of what interested us um and really drove us to to to spend so much time at the intersection of crypto and games is this idea of incentivizing Entrepreneurship and I don't mean the entrepreneurship just of the startups we back but of the players um of the people that are interacting with that game um for the last 100 years I mean basically for the first 100 Years of you know from early 1900s to late 1900s there was a big ideological debate that basically argued for 100 years and then eventually it was settled that if you give people property rights and you give people Commerce rights economies grow right like that was the core of the USA versus USSR capitalism versus socialism debate is this idea that if you if people can can do things in a system then then people are entrepreneurial and they go and they build and they start businesses and and the economy grows um we are progressively a more Digital Society um and we should have digitally native property rights and commerce rights for that Digital Society the more that we can accept that that Digital Society is global instead of geographically bound and the more that we can have standards that allow those people to connect and to know the ground rules and to to really have tech level composability the more that we can have entrepreneurship um of the people of the individual and and like that's going to be a massive driving force of digital economies I think I think some good news bad news from my perspective on this one I'm going take it a slightly different direction we still need to convince governments sort of plurally that you don't regulate protocols you regulate businesses and applications running on top of protocols and so we don't regulate SMTP right that's not something that's going to be regulated and so when we're talking about intellectual property rights that are running on something that should not be regulated that is going to be a jurisdiction by jurisdiction whether it's trademark or copyright in a local jurisdiction or patents or things like that so will be a for the time being and from my perspective for the foreseeable time being a balkanized jurisdictional regime at that level because just where we're at in the regulatory conversation globally we're still trying to convince Regulators that you can't regulate just open protocol systems SMTP is a good example Microsoft Outlook Google anyone else running through that yes maybe but the underlying Protocol no so in terms of a global IP system maybe at some point but right now I think that will be balkanized on a jurisdiction by jurisdiction basis yeah I think also may maybe some of the IP kind of global standards we're talking about could be less uh intense as an overall system maybe there could be focused on distribution right or Media or content or merch or games or some very specific kind of vertical that might be a little easier to manage than the overall system but I I agree with your with your general point right we we're talking a lot about like blockchain and and infrastructure stuff let's talk a little about creators and and and talent right you know Carlos you're you're invest in the these games and and I'm assuming you guys are working with talent and creators a lot and and and advocating for them how are you guys using blockchain to kind of help them protect their own rights their their assets their work their ideas the typical creator that has been funded in the game Space um comes from the opposite end where these game companies just own all of their assets and players think that they own their assets because they paid 50 bucks for a skin on Counter Strike but that's just really the terms of service allow you to pretend that you own this asset but you don't really own this asset and so for us it hasn't really been about working with creators to to let them own their things but rather picking a subset of creators that wants their Community to own part of the IP or perhaps the entire IP although it tends to be the case that just owning the nfts is far more um practical than trying to have the entire game and the entire IP owned by the community and so for us it hasn't really been um uh you know starting the Battle of of getting the creators to own it to begin with but getting the creators to work with the community to allow the community to own some pieces of it and like what are the governance challenges right so to your earlier questions around like like challenges right two two big challenges that we pay attention to um are distribution and onboarding right which we can sort of talk later about infrastructure but then there's governance and that's really attached to IP um if a bunch of people own for example they have the license to individual nfts but they don't own the entire brand how does governance for that work um if a bunch of of people own the entire company then how does governance for that work and just really defining um ownership and then the the the governance setup that emergence from it to allow the different rights holders to work together um is part of like what we do right so we spend time with with Studios trying to Define um how this Digital Society is going to work and how it's going to be governed and how we're going to make good decisions around it um but leveraging individual and player ownership versus just Creator ownership that's cool I think uh you know uh at future we we we have a similar Outlook but we work with creators on an individual one-on-one basis and then we'll go to a game right or some other kind of big property and help develop an offshoot of that original Ip to co-create something new right it might be a merge project it might be media it might be a TV show it might be animated series might be music right but that that's what we're focused on right so we work with individual creators on a on a one-on-one basis to develop these systems and programs TJ did you want to say something yeah no I mean I think you know consumers are really following creators these days whatever they're pushing to the public you know they're buying um so I think it's really important to to realize that um and recognize what the creators own and what they do not own um you know you're seeing now you know United States with the writer strike um you know in movies they're you know losing a lot of their power and they're not being recognized for their work so I think you know you're going to see more of that stuff happen um and yeah so this is a this is a really complex question question right there's sort of the first level answers which I totally agree with about the intellectual property rights and how that fits into the stack one of the more nonobvious things is how that IP decision implicates Security's laws all right so for example I'll unmask myself as a Collectibles nerd I've got a lot of baseball cards things like that if I own a baseball card I got a Ken griffy junr rookie what do I own I own a Ken Griffey Jr rookie that's it I don't have any expectation from Topps or Don Russ or anybody else to what they're going to do to create value for that I can just enjoy the content in my baseball card think about that as an nft right if all of a sudden Topps came out and said look Andy you've got this griffy rookie we're going to build a really cool MLB game you're going to be able to enjoy for a long time and our efforts to build that game is going to entitle you to IP rights in our broader ecosystem that we're building now all of a sudden that baseball card starts to look more and more like a security in the sense that I'm depending on tops to go build out that game with something more than an entitlement something more than I can just happen to engage in that ecosystem but I have a legal right and an expectation that they're going to build value for me as a baseball card holder so as we are thinking about complex system design it's so much more than just this one narrow IP question it is what does that do for Securities laws different tax outcomes how do we think about the bake secrecy act and currency are there money laundering obligations so how we make one IP decision is going to Ripple through your entire system design it's a really complicated question yeah I think that's right but to your to your baseball card uh point right if you were the biggest YouTuber that baseball collector and tops came to you and they had this game they would have to work with you right they would have to negotiate a special deal they would have to give you a cut of something you'd have decision-making power you'd have a vote and say you maybe you do an offshoot t-shirt hat whatever it is right so I think the the the point I want to make is when when you lean on talent and creative you have that extra ounce of Leverage where you can shift it a little bit and maybe it's not a security now because now maybe I'm the head of marketing or I'm actually doing real work and I'm not just independently uh relying on on their output but I and and what you got into right there is a really good Dow design system right so what we're then doing is taking something that could otherwise be a security pushing the entrepreneurial efforts into the community and that's when you're thinking about a really there's an infinite number of ways that we designed Dow but that's just one really good attribute of how can you do it from a business perspective you're also engaging with the bottoms up Community great business opportunity how you feed all those pieces together will absolutely risk mitigated from a Securities perspective and can change the character the IP license that you want to give those folks what can they do with it and how does that fit into our system the other thing too that it does which isn't illegal topic but the empowering of creators is absolutely just the normative value statement right thing to do because it is the right thing to do but it will also be a better business in the long term it's the tip of the spear right we we we go behind the creators and talent and that opens the door door and now you're able to to your earlier Point involve the community and users and and now you know distribute whatever the value of uh of that asset is across a lot more people right um what would you advise a web 3 company or startup who had some interest in creating some IP in this space how would you advise them to start from kind maybe a general strategy standpoint on how they should view IP rights and creators again it it really depends on the model and what they're building so I the way that I like to think about it is now I'm I'm a I'm a I'm a corporate lawyer and a Securities expert so I see a nail right I'm a hammer that sees a nail so and this is going to be recorded but we have to be very thoughtful about how we communicate what those IP rights and what we're building so to say the quiet part out loud you absolutely cannot say we're going to go build a really sweet game and you're able to use your nft in that game forever and for all time if you actually communicate that that's going to be very bad for your security strategy and so having a very rigorous and thoughtful communication strategy around whatever you're building is the most critical thing so you can do a wide range our design space is enormous in different companies different projects different entrepreneurs are going to make different decisions but one of the common denominators is going to be understand where you're going work backwards and then build in a communication strategy that's going to look good when you get to that place that you're going so how we communicate the value proposition of the Native digital asset in the system is not always reflective of all of the private things on the road map that we're ultimately going to build and deliver to our community that's value over time so TJ you guys are developing new games all the time and and new properties all the time how are you guys kind of thinking of strategy from the top down yeah I mean I think it's important to think about it early even if you think there's no value in the IP you're creating um I think it's important to talk to a lawyer um I was fortunate to grow up with an IP attorney who you know as entrepreneur I was always building stuff and she was like oh you should pay attention of that get you know copyright for that and at the time I was like yeah you know I'll forget about that I don't think it's that important but I think as an entrepreneur and as you know people that we invest in as well I would tell them to focus on that very early because if it does blow up it's too late and often times people take advantage of that and at that point at that point it could be too late perhaps to protect it yeah like I I I think surely before something goes public um you want to make sure that you understand the structure ownership structure governance structure at least you you understand it as best as you can um but you know like to a broader structuring point so early in the bull market or through the bull market everyone did saff deals um so these simple agreement for future tokens and what we've seen as a transition towards these Equity plus token rounds um we have always been very Equity dominant in our structure in particular as early stage investors because it was always difficult to at the very early stage before seeing the full game before understanding how people are going to play this thing before understanding what makes sense to only index us to the token and the reason why we have done Equity plus token deals is because it allows us to have value capture throughout the entire um possibility of the game and then we can think about what this amazing game looks like and we can design design the game design the system basically grow That Pie as big as we can grow it and only after that add the economy and the ownership on top for us it's a concern when people try to Define too much structure up front because that's the tail wagging the dog you know you don't even know what you have yet and you're just completely biased towards one simp like one form of ownership or just the token or all the nfts are you know are doing or this and so it it's a matter of balance I think you know someone should go into building IP in in in building a game sort of having read the the basics of well it could be structured this way you know you have that first conversation with the lawyer you approach it with an open mind um and then you just go and build and you try to build the best thing that you can build and afterwards you say okay here's this amazing thing that I have built how will value be created in it based on this this or that form of value creation it should be structured in this or that way um defining structure up front to me is as I said is tail wagging the dog I think at at Future what we like to do when we're advising uh new web3 companies is really explain to them and this a little bit more granular that the budget they have in place to launch the marketing the events all of that needs to be focused on talent and creators right it is Shifting the mindset of you know traditional media spend and and other kind of traditional marketing efforts and really leaning on creators and giving them the full Reign to run that entire kind of marketing content PR whatever you want to call it a part of the business and and that's a paradigm shift right because a lot of these people come from traditional Finance Trad traditional business yeah I mean gaming gaming has been this way now for a while so Apex Legends when it launched in was it 17 18 whatever it was a handful of years ago so no one knew that Apex Legends was coming out and then one day all the top streamers were playing Apex Legends and it went to like 300 million Maus in the space of two weeks and it's like the biggest game launch ever and it was all Creator Centric and that's what we've seen with twitch um and we saw with YouTube and sort of like progressively more and more the games have deeply relied on creators um and we have actively invested behind that thesis there's a number of companies in our portfolio that are co-founded by strong YouTube creators um or twitch creators or whatever it may be and so that paradigm shift because you know in traditional games ecosystems now um app store downloads right like it's all the issues with privacy and and um deprecation of the identifiers ggpr like just all the the the Privacy challenges that make it hard for you to tackle users um and so it's been getting harder and high harder to acquire users in gaming um in at scale um and the strategy that keeps being the best strategy is just working with the best YouTubers working with the best twitch stars and now some kick starts as well um and so for us um that Paradigm Shift started I don't know five years ago and it's still the most interesting part of games distribution for us yeah no I definitely agree and that's one of our focuses as well is I think um the return on investment and traditional advertising is is um lessening and you know we're working with a lot of creators as well one game that we're launching is called homotopia which is a interior design simulation game where people can build their dream home so we're working with a lot of creators now where they're streaming all day as they're building their dream home and we're getting a lot of you know people playing our game as a result of that um and working with a lot of micro influencers doesn't have to be you know the top influencers out there there's thousands of micro influencers that make their living just streaming all day off of various games and I think it's important too to reward them for that and the value that they're bringing to your game for sure Carlos do you mind talking about your guys' expansion in latam and India and what you guys are seeing in those those developing markets developing markets are interesting from a crypto adoption perspective because at the very base of them they have more currency volatility and so in general people are more interested in um trying out alternative means of value storage or or or value transaction um they're also interesting markets from a gaming perspective where gaming is growing very fast if you think about um uh device accessibility so a lot of those markets are mobile dominant we've had better and better mobile phones we've also had India with more um 4G connectivity um after Geo sort of pushed into that market um Brazil the same thing um and so for us those are growing markets from both data and device perspective with um a predisposition to like blockchain um and we've been investing actively in in both of them and so for us um it's certainly a place that we tend to spend more time time um the challenge is just from a talent perspective a lot of the core games Talent today still exists in the US and then in Asia and Korea and China and some of it Japan as well um and we really focus on backing the best games teams in the world to build games um and so that's probably why we haven't done as much but we would certainly you know we're always looking to do more um I I kind of forgot this question at the beginning but TJ What motivated you to get into blockchain I think it's you know just rewarding the people that are adding value in the end of the day um you know you see fortnite launching Creator mode you have a lot of creators building games Within These uh you know open platforms um and I think it's a transparency to where the value is coming from um sure you know the developers of the games themselves you know built that you know starting point but the end of the day I think the creators the streamers um the people creating within these games are bringing the True Value and I think the transparency through the blockchain um you know creates value for them and and that's where you know why I came into the business for me um because I've gotten scam trying to sell items in World of Warcraft and I think that every time we've had a great game that got connected to the internet an economy has always emerged around it um whether it's World of Warcraft Elden ring like just pick it right if there's a good game that you connect it to the internet there's a flow of value between timer cash poor users and time poor cashr users um and if we can bring that black market Market into a white Market um I think that it will be larger um and so we want to bet on economic expansion through digitally native property rights for digital Nations Satoshi I mean once once I fully got my head around Bitcoin and the implications of it I'll date myself for any other Seinfeld fans there's the episode where George sees the Red Dot on the white sweater and then once you see the Red Dot on the sweater you can't unsee it once my head got around Bitcoin the power and how part of my language how up our Global Financial system is and what it does to people once you have that mental shift you can't unsee it and I made my life's work trying to advance web 3 Bitcoin cryptocurrency it just happened that I was a lawyer at the time when I became a bitcoiner and and for me it really was you know uh I started off in corporate finance as well as an attorney um and I've always been very passionate about entrepreneurship especially for black Brown gay trans women any underrepresented minorities right and this open space of of blockchain is a new industry that has room for traditionally uh people that don't have room made for them right so that was super important for me so our times up guys we appreciate everybody thank you for your [Applause] time