The American Dream is Going Digital: The Land of Opportunity is the Internet

This tweet went viral. As one might expect, the responses ranged from despair over a lost generation of youth, to proclamations that China would inevitably overtake the West as the leading superpower. Some ascribed the disparity to the decline of NASA in the public eye, others were encouraged that Teacher ranked close second. The societal message that underpinned all the commentary said in short that vlogging and YouTubing are wasted outlets for potential and ambition. My takeaway was entirely different and at the same time, excitedly optimistic:

The American Dream is going digital, and it’s not going back.

Entrepreneurs in our parents’ generation and before would look for pre-installed distribution to set up shop. Before the internet, this mostly took the form of brick and mortar locations in commercial districts and malls, which capitalized on “foot traffic.” In a post-Internet era, where platforms have fought tooth and nail to reach the incremental set of eyeballs and capture the marginal user minute, “foot traffic” is happening online. Every person on their phone or laptop is a pedestrian in an ever-flowing river of “digital foot traffic.”

Naturally, the mom-and-pop businesses of today are YouTubers, Twitch streamers, Shopify dropshippers, webcomic artists, podcast hosts, Tik Tok stars, OnlyFans creators, indie game developers, streetwear resellers, Etsy store owners, Clubhouse hosts, Substack writers, and many, many more. Deploying on top of the distribution railroad tracks that have been competitively laid by internet platforms over the past decades, addressable online customers have never been more abundant.

As the son of immigrants, I had the privilege to deeply internalize the American Dream growing up. Here’s a picture of my first “business,” a Pipeworks booth I built to sell my used Gameboy:

Upon reflection, it’s a small wonder that I was actually able to find a buyer for the single SKU I was offering in three square feet of retail space. A few years later, I sold a 1st Edition Charizard Pokémon Card on eBay for $252.50 (while an incomprehensible sum for a twelve-year old, I probably should have held onto it). This was pre-PayPal, so the buyer mailed a check made out to my mom, and upon settling, we shipped out the card. At that moment, my eyes had been opened to the power of the internet, and I’d been bitten by the entrepreneurial bug.

Today, I am a general partner at Pace Capital, a venture capital firm based in New York City. Over the past decade, I’ve had the privilege of speaking to and working with incredible companies, many of which deeply enable the pursuit of internet-first entrepreneurship. At a previous firm, Thrive Capital, I invested in and served on the boards of Twitch, Patreon, Unity, and Grailed among others.

When Twitch let me invest and join the board, the notion of making a living playing video games was beyond comprehension. When people asked, “Why not just play the game instead of watching someone else?” I thought about the hundreds of millions of games of pickup football that didn’t happen every Sunday. It was clear that Twitch had captured the hearts and minds of ambitious creators, eager to make a name for themselves and pursue their dreams. Back then, there were a couple hundred thousand active streamers, with very little monetization implemented outside of donations (Twitch subs wouldn’t come until later). As of December 2020, that number is almost 10M and climbing, with the top streamers earning well over a million dollars a year.

Patreon struck right at the heart of facilitating entrepreneurship. With so many user-generated content platforms optimizing for distribution in order to drive advertising revenue, no one was thinking about how to help creators be fairly compensated for the value they were delivering (see Atomic Value Swap). It was so obvious in the early days that Patreon was filling a void in the ecosystem. Although I lost the opportunity to lead the Series A, I had such conviction that I subsequently led both the Series B and the Series C rounds of financing. Today, Patreon is processing well over one billion dollars annually of what is best understood as payroll, and they are just getting started. There are over 200,000 creators on Patreon who are able to earn a living and grow their businesses in a way that was impossible before.

Unity is a special company that is hard to describe in a single paragraph, but what excited me so much about the company was and still is the vibrant developer community that caters to indie game devs. Creating a world class piece of software was just the first step for Unity—by positioning themselves as the easiest to learn game engine with the richest community to help newbies get up the learning curve, Unity represented an incredible “arm the rebels” strategy to the game development ecosystem. In fact, the two biggest breakout successes of last year were both built on Unity by indie game studios (Fall Guys by Mediatonic and Among Us by Inner Sloth) as well as what look to be the breakout games of this year (Rust by Facepunch and Valheim by Iron Gate). To give a sense of the scale and scope of opportunity, Inner Sloth has fewer than 10 employees and made $10M on iOS and Android last *month*. Facepunch has 20 employees and had 193M hours watched of Rust on Twitch last month, compared to 94M hours watched of Fortnite.

Grailed is an incredible community built around the idea that self-expression through fashion also happens to be very monetizable. Like art, the streetwear landscape accidentally (and then purposefully) stumbled into scarcity as a driver of value when self-expression intersects with consumption and collecting (see Elasticity of Demand/Maslow’s Hierarchy of Needs Framework). Many re-sellers have built small empires around buying and selling clothing and sneakers. Most of us don’t contemplate being able to sell something for more than we bought it for, but that is an endemic part of the mindset for many Grailed users. In college, I used to raid the Barney’s Warehouse Sale (RIP) every year and re-list the items on Superfuture. One of the most misunderstood things about Supreme and its success is that for many, Supreme is strictly economic: it is the best, most consistent way to turn $60 and a morning of waiting in line into $120+. Today, that is easier than ever with Grailed being the watering hole for buyers and sellers.

For my parents’ generation, the American Dream meant physically moving to America to pursue economic and social mobility—a better life. ^[a][b][c]For today’s generation, the internet has replaced The United States as the Land of Opportunity^[d]—the place where hard work and an appetite for risk is rewarded the most. This is most evident in the vibrancy of the venture-backed startup ecosystem itself (and its decentralization from the confines of Silicon Valley), but extends entirely to individual proprietors around the world who will become the next generation of SMBs.

What does this mean?^[e] All of the infrastructure and services that were once optimized for physical SMBs / mom-and-pops need to be overhauled to accommodate internet-first businesses.^{[f][g][h][i][j][k][l]} If you were a YouTuber and you walked into Bank of America asking for a small business loan^[m][n], you would be met with a quizzical look followed by a polite but firm dismissal. If you have a growing brand and you’re looking for a short-term brick and mortar activation, how many landlords are ignorant to what you are trying to accomplish? What does advertising as an industry look like when billboards are no longer along the sides of highways and embedded in websites but exist as fragmented, individual snippets of millions of Tik Tok accounts, podcast episodes, and stream overlays? What does the logistics supply chain look like when retailers and wholesalers are replaced by dropshipping brands and influencers?^[o][p] What does payroll look like when W-2s aren’t a thing anymore^[q][r]?^[s][t]

Every line item on the P&L will subtly, but fundamentally change with internet-first businesses. Revenue, COGS, and financing will change with different business models and monetization pathways (i.e. what happens when a business’ top line is its Patreon account?). Similarly, every piece of B2B software and service provider that engages with marketing, sales, operations, administration, etc. will subtly, but fundamentally change.^[y][z]

America will always exist as a beacon of freedom against a backdrop of totalitarian regimes where the chance of being disappeared by the government is non-zero. But the analog, geographic monopoly it once had on ambition has been surreptitiously replaced by the digital frontier of the internet.

OTHER WRITING:

• FRAMEWORKS (10 pgs)
• THE SHADOW OF DISUTILITY (4 pgs)