This week, Worldcoin, an outfit that aims to serve as proof of identity in a world where it’s harder by the day to distinguish a human from a bot, raised $115 million in Series C funding.
Led by 10-year-old venture firm Blockchain Capital, whose stakes include Coinbase, Kraken and OpenSea, the investment brings Worldcoin’s funding to at least $240 million, although the controversial organization – founded in 2019 by OpenAI CEO Sam Altman – has a lot to prove.
Yesterday, we spoke with Blockchain Capital General Partner Spencer Bogart about what gave him confidence in Worldcoin, which aims to create a global ID, a global currency, and an app that enables payments, purchase and transfer. Like many others, we wonder how it will achieve its goals if, at least for now, its mission relies first and foremost on convincing tens of millions of people to allow Worldcoin to be scan their irises with futuristic, tech-dense globes.
Below is part of that conversation, edited for length. You can also hear a longer conversation here.
Your co-investors in this new round include previous backers Andreessen Horowitz, Bain Capital Crypto and Distributed Global. Is Khosla Ventures or Tiger Global, who were earlier backers too, coming back?
They may be part of this financing; I don’t believe they are a big part of it.
How much of the company do the investors own? I believe that negotiating with Sam Altman is difficult because of the power he wields and also his vast experience on the other side of the table as an investor.
That is a correct attitude. Sam is an awesome builder and knows how to handle a cap table. Once again, I apologize. It is not a figure that is before me now. Usually, companies sell 20% of [equity] of each financing. Granted, things can move down or up from there significantly. I think in this case, the number will be much lower than the entire Series A, Series B, and Series C.
How long have you been talking to Worldcoin, and what inspired you to lead this deal?
The original genesis was Sam thinking: what if I could create a cryptocurrency that I could distribute to everyone in the world and everyone would have an equal share of it? For me, from a venture perspective, that’s definitely interesting [though] I don’t know that it’s something that we’re particularly excited to go and underwrite based on things that our team is generally interested in.
[Meanwhile] it requires basically ensuring that no one person accumulates a disproportionate share of it, which requires people to be able to recognize unique people. And it gets into the part that we’re really excited about, which is World ID. This ability to easily distinguish between machines and people on the internet [because] most of the internet is supported by ad revenue and it costs as much to serve bot traffic as it does to serve human traffic. This is why various applications and service providers use CAPTCHAs to distinguish between bots and humans. But that is no longer possible in a world of advanced automated systems and especially AI-powered things. It also doesn’t differentiate between unique people, so I don’t know if the same person will come to consume a resource in excess.
That brings us to: okay, how do we provide a way to distinguish between humans and bots and ensure that each human is unique?
Which leads to biometrics.
The root of what defines people is biometrics, and my first thought was: why make this custom hardware to scan eyeballs? Like, billions of people are already walking around with an iPhone. Why don’t we use Face ID, right? The problem is that human facial structures do not have enough randomness or entropy to distinguish unique people, on the scale of tens of millions or hundreds of millions of people.
I didn’t realize that it was that.
It wasn’t something that happened to me either. I don’t think about the fact that once you get past a hundred million people, there are a lot of people like Spencer Bogart; their facial structures can be sufficiently indistinguishable from mine. Fingerprints have the same problem; there is not enough randomness in fingerprints.
That brings us to two practical options, DNA with enough randomness to prove human uniqueness on the scale of billions of people. But you provide a lot of information on DNA. Then there are irises. As it turns out there is an insane amount of entropy and randomness in the human iris. And in this case, the team built an insane amount of protection. You get an iris scan, it doesn’t save your iris by default. It is then deleted from the device. It’s just used to create what’s called an iris code, which is a unique mapping or encoding of your iris. And it’s compared to everything else. And now, with these iris codes, we don’t know their name or location or anything. All we know about everyone is that they are amazing people.
I believe that a business strategy — helping companies minimize their interaction with bots — is the most profitable opportunity right now for Worldcoin. You can also deliver this cryptocurrency to everyone, although it is not clear to me how people will use it. But before any of this happens, you need to get a significant number of people in front of these strange and inaccessible orbs, when people are already nervous about biometrics and cryptocurrency. Worldcoin says it is currently scanning the eyes of 2 million people. How much does it take to make it meaningful? A billion?
These are the right questions. It’s about: do you have a network of provably amazing people? And that can be interesting in applications and businesses to a certain extent. But I think it will depend on the use case. By the time you get to 10 million unique users, there will be a variety of applications that want to use that, while others are not interested in using it unless you are in a network of 500 million or a billion or 2 billion people.
Some of the other challenges here are yes, obviously, orb distribution. Currently there are 200 to 300 [orbs] in the wild today, with another 2,000 in production and waiting to be deployed. Then there is this question of public perception. SOne thing we flag as part of the investment is: is there so much negative perception of it that no matter how confident we are that it will be 100% viable, the public perception will be so negative that the people do not want to participate?
So far, the data says otherwise. Worldcoin has already onboarded nearly 2 million people by operating a sound capital-intensive boots-on-the-ground strategy, and it’s still in beta testing. This without pushing or pulling any marketing levers; it is no protocol even live on the mainnet. This is just the initial test.
As for some of the things it can be used for, Elon Musk has already talked a lot about a bot problem on Twitter, and expressed the idea that if we all pay $8 a month, that would help bot problem solving. We believe that World ID is a lower friction way of solving the same problem and can be a higher fidelity solution. And there are various new applications and services that did not exist because of our inability to make this historical distinction. What that is, I don’t know, but we are interested in funding them.
Again, you’ll hear a lot more about investing here, including why OpenAI could be a major Worldcoin customer someday, why Bogart wasn’t bothered when hackers recently -installation of password-stealing malware on the devices of many Worldcoin orb operators, and why he was attracted to flash trades on the blockchain.
