It has long been said that the internet has a power to remove middlemen, to make opportunity more accessible, and to lower barriers to entry. Throughout Spring/Summer 2020, we’ve seen this promise rapidly become true, at scale, in a number of industries. These markets have eliminated middlemen both as gatekeepers (hurdles to access) and as distributors (aggregators of supply and demand). As such, these markets have emerged peer-to-peer structures, greatly increasing their resolution. Let’s look at these dynamics in a few examples:

Rolling Funds: productized by AngelList, they’ve enabled faster, more granular raising of venture capital funds. They’re perfect for reputable angel investors to raise external funds from smaller LPs. Sahil Lavingia and Cindy Bi are leading examples. Fundraising, especially as a first-time fund manager, used to take hundreds of meetings with HNWIs and funds-of-funds. Now, someone with a strong online following can raise hundreds of small cheques from people they have never even spoken with.

The corollary is an increase in the resolution of the market. Suddenly, the set of entities you can raise from, or who are able to invest in these markets, is no longer a pool of professional capital allocators, but nearly anyone.1 The minimum cheque size changes too, and the micro-LP emerges. In the past, a multi-millionaire might write a $250K cheque to Kleiner Perkins. Now, a tech worker might write twenty-five $10k cheques to smart solo GPs.2

Substack: not only are new writers like Nathan Tankus making a name for themselves (and a full-time income) on the newsletter subscription site, it’s also attracting well-established journalists like Alison Roman, Alex Kantrowitz, Anne Helen Petersen, and more.3 With a couple thousand subscribers each at $5 a month, they’re probably making more than they were at their traditional institutions.

The (editorial) gatekeeper has disappeared, and the unbundling again increases the resolution of the market: instead of reading a journal’s opinion columns, I might just subscribe to a number of newsletters and curate my own columns. Instead of the author being paid by the journal, which might not be entirely aligned with the author’s views, the author is paid directly by their readers. In terms of authenticity, this peer-to-peer model is superior.

OnlyFans: People had been talking about “Patreon, but for porn” for years; here it is at last.4 This is yet another way for people to capitalize on their online popularity, connect peer-to-peer with their audience, and cut out traditional gatekeepers5 and distributors. What’s particularly interesting about OnlyFans is that it is obviously superior to the traditional distribution model: old-school porn studios used to sell videos by the view. As pornstars of the 2010s pioneered with private Snapchats, it turned out that community and (the illusions of) exclusivity and attention are real drivers of engagement, and, in turn, revenue. Having a presence on OnlyFans is massively more lucrative than being a traditional pornstar.6

SPACs: there’s been a surge in Special Purpose Acquisition Companies, which are effectively massive blank cheques ($100M+) to highly reputable investors, for them to use to take private companies public. Like rolling funds, these are primarily vehicles betting on the reputations of their champions.

Of course, these trends are not entirely novel. For example, Patreon and Bandcamp are spiritual precursors to Substack and OnlyFans.7 But the pace has picked up, and in a COVID world, tech accelerates and we’ll see more of these enterprises soon. For example, homeschooling, whether by choice or not, is rapidly becoming more common. I expect that someone will completely remake online tutoring, and teachers will move from the classroom to giving 1:1 online lessons.8 In this environment, top-performing teachers will finally be paid fairly. Similar trends are already emerging for fitness coaches and therapists.

What’s remarkable about these trends is that they’re taking place now and not earlier. In terms of pure technology or regulation, any of these companies could have been started ten or twenty years ago. Why did it take until 2020 for simple innovations – paid individual subscriptions, monetizing reputation – to take off? I cannot imagine any answer other than that the internet has finally hit a certain maturity in that it is possible for people to achieve real reputation at scale without the gimmick of going viral. The online self-published media that we have – Twitter, Medium, YouTube, etc. and all their deeply imperfect discovery algorithms – is a mess, but it seems to be successfully giving a voice to creators and enabling reasonably effective discovery/distribution of content. Platforms to capitalize on reputations are developing as quickly as it is actually possible to develop monetizable reputations at scale.

The middlemen of old were gatekeepers and aggregators: content creators would apply to middlemen, who would in turn distribute the content to an established base of consumers. The middleman both aggregated supply and demand in the market. The matching of the two sides of the market was coarse at best. The technology we have now – what Twitter, Twitch, etc. ultimately represent – are opaque interest matching engines that enable sufficient distribution and discovery of content, such that the supply and demand sides can actually be matched on a peer-to-peer basis at scale. This is remarkable.

Credit is due to Justin de Guzman, who succinctly captured the spirit and core point of this essay in a single tweet.

  1. Some accredited investor rules apply. 

  2. Consequently, I wouldn’t be surprised if we start seeing even more angels who play in Pre-Seed/Seed/Series A, and more party rounds that boot out the traditional venture firms. I don’t think this would actually have an effect on round pricing, but it would – very importantly – usually delay the addition of the first investor board member to the Series A or B. 

  3. Source 

  4. I’m baffled that no-one else had built OnlyFans previously. It seemed the only real hurdle was compliance and getting onboarded with payment providers. Now, someone out there is building a bootstrapped, soon-to-be billion-dollar business, because they were willing to go through compliance slog that no-one else could be bothered doing. 

  5. Camsites often take 30 - 50% of their streamers’ revenues! 

  6. You’d be shocked by how little money even the most popular traditional pornstars make. Being on OnlyFans, or even on a regular camsite, with a couple hundred followers, is easily a better deal (while also being much safer for the star). Mia Khalifa – briefly one of the biggest names in porn – made less than $12k during her tenure. Being a male pornstar is basically a minimum-wage job. Porn is a somewhat neglected industry that has been decimated by online piracy, and doesn’t have a powerful institution like the RIAA to defend it. 

  7. If you’re willing to stretch the definition a little, you could argue that Instagram influencer advertising – where a brand works directly with the influencer – disintermediates the traditional advertising agency model. In the context of our discussion, it’s also another good example of building and capitalizing on reputation in one stroke. 

  8. For the reason behind 1:1 specifically as opposed to “small class sizes”, please see Bloom’s Two Sigma Paper