Sarah Tavel's Approach to Web3: Focused on Experience, Not Protocol

General
1

Sarah Tavel has made notable investments in the crypto/web3 space at Benchmark, but her approach is distinctly different from many crypto-native VCs. Here’s how she thinks about the space.

Experience Over Protocol

Tavel has been clear about her focus:

“I’m focused on web3, but I’m not focused on crypto at the protocol level.”

This means she’s not investing in Layer 1 blockchains, consensus mechanisms, or infrastructure. Instead, she cares about consumer experience—products that happen to use crypto/blockchain but are evaluated on their product merit.

Key Web3 Investments

Chainalysis

Tavel led Benchmark’s investment in Chainalysis, the blockchain analytics company. The origin story is classic VC hustle:

Katie Haun (then a federal prosecutor, now a GP at Haun Ventures) mentioned to Tavel that she used Chainalysis in her government role investigating crypto crimes. Tavel cold-emailed founder Michael Gronager and led the investment.

Why it fits her thesis:

  • Data network effects (more data analyzed = better pattern detection for all clients)
  • Not protocol-level—it’s analytics software that serves the ecosystem
  • Clear value prop for enterprises (compliance, investigation)

Sorare

Benchmark led Sorare’s funding—the Paris-based NFT fantasy soccer platform that raised $730M across two rounds.

Why it fits:

  • Consumer product first (fantasy sports) that uses NFTs
  • Network effects from more players and more officially licensed content
  • Not speculative NFT trading—actual utility and gameplay

Unannounced Gaming/NFT Investment

Tavel mentioned investing in a gaming startup with “crypto or web3 flair”—details not yet public.

The “Bifurcation” Prediction

Tavel has predicted a coming bifurcation in web3:

The space will split between:

  1. Speculative/trading-focused projects - driven by token prices
  2. Utility-focused products - where crypto enables better experiences

She’s betting on the latter. The former might produce short-term gains but won’t build enduring companies.

Why Consumer Product Experience Matters in Web3

Tavel believes:

“The experience of a firm that has built enduring consumer companies is its own specialized discipline that’s going to be more and more relevant in this new web3 world.”

In other words: as web3 matures, the winners will be those who nail user experience, not just those with novel token mechanics. Her Pinterest/consumer background is directly applicable.

Crypto Investing = Early AdTech?

Tavel has compared crypto investing to early AdTech:

  • Messy and speculative
  • Hard to separate signal from noise
  • But massive opportunity for those who get it right

This suggests patience and selectivity—not FOMO-driven investing.

NFTs Beyond Collectibles

Tavel has expressed interest in NFT applications beyond profile pictures and collectibles:

  • Royal: NFT music rights (ownership of song royalties)
  • Access and membership: NFTs as tickets or community membership
  • In-game assets: True ownership of gaming items

The theme: NFTs that provide utility and cash flow, not just speculation.

Key Takeaway

Tavel’s web3 investing is an extension of her consumer investing thesis:

  • 10x better experience (enabled by crypto)
  • Network effects and accruing benefits
  • Focus on the product, not the underlying technology

For web3 founders: if you’re pitching to someone like Tavel, lead with the user experience, not the token model.

What’s your take on “experience-first” web3 investing? Is this the right approach, or does it miss the more transformative protocol-level opportunities?

2

Interesting perspective, but I want to push back on the “experience over protocol” framing.

The Case for Protocol-Level Investment

1. Infrastructure Enables Applications

You can’t have great web3 consumer experiences without solid infrastructure. Ethereum’s high gas fees killed many consumer use cases. Layer 2s and alternative L1s are enabling experiences that weren’t possible before.

Counter-argument: Maybe you don’t need to invest in protocols to benefit from them. You can build on top once they mature.

2. Protocol-Level Network Effects Are Stronger

Ethereum’s network effect isn’t just users—it’s developers, tooling, security, liquidity. These compound more than application-level network effects.

3. Winner-Take-Most Dynamics

At the protocol level, we see power law outcomes (Ethereum dominates smart contracts, Bitcoin dominates store of value). At the application level, there’s more fragmentation.

Where I Agree with Tavel

User Experience Is Terrible

Most DeFi and NFT experiences are still unusable for mainstream users:

  • Wallet management is confusing
  • Gas fees are unpredictable
  • Irreversible transactions are scary
  • Onramps/offramps are clunky

The teams that solve UX will capture massive value. Maybe that’s her actual thesis—not anti-protocol, but pro-UX-layer.

Speculation ≠ Utility

The 2021 NFT boom was 90% speculation. Projects with actual utility (gaming, memberships) will outlast the JPEGs.

My Synthesis

Both matter. You need:

  1. Protocol innovation to enable new experiences
  2. Application innovation to deliver those experiences to users

Tavel is focusing on #2 because that’s her expertise. But someone needs to fund #1.

The question is: which layer captures more value long-term? I’m not sure the answer is as clear as she suggests.

3

As an artist who’s been in the NFT space since 2020, I appreciate Tavel’s “beyond collectibles” framing.

The Problem with NFT Collectibles

The 2021 boom gave NFTs a bad reputation:

  • Speculation-driven prices (10K PFP projects with no utility)
  • Wash trading inflating volumes
  • Celebrity cash grabs
  • Rug pulls

This obscured what’s actually interesting about NFTs as a technology.

What Excites Me About “Utility NFTs”

1. Music Royalties (Royal, Sound.xyz)

Artists can sell fractional ownership of their song royalties. Fans become investors with skin in the game. This realigns incentives—fans want to help promote music they own a piece of.

Why this matters: The music industry’s royalty system is broken. Artists get paid months later through opaque intermediaries. NFTs enable direct, instant, transparent payments.

2. Event Access (Tokenproof, GET Protocol)

NFT tickets that:

  • Can’t be counterfeited
  • Enable secondary market royalties back to artists
  • Unlock ongoing perks (exclusive content, future presales)
  • Create provable attendance history

3. Creator-Fan Relationships

NFTs as membership passes to creator communities. Top 100 holders get:

  • Discord access
  • Early content
  • IRL meetups
  • Voting on creative direction

This is the “1000 true fans” model on-chain.

What Needs to Improve

UX is Still Painful

  • Buying an NFT requires: fiat onramp → buy ETH → set up wallet → navigate OpenSea → pay gas → hope transaction works
  • Compare to: tap Apple Pay

Discoverability

  • How do fans find artists’ NFTs?
  • Current platforms are trader-focused, not fan-focused

Legal Clarity

  • What rights do you actually own?
  • Most NFT “ownership” is just a token pointing to a JPEG on someone else’s server

Tavel’s focus on utility over speculation is exactly right. But the UX gap is why mainstream adoption hasn’t happened yet.

4

The Chainalysis investment is particularly interesting from a compliance perspective. Let me explain why it’s such a strong business.

Why Chainalysis Wins

The Regulatory Tailwind

Every crypto company needs to comply with:

  • KYC/AML requirements
  • Sanctions screening
  • Tax reporting
  • Suspicious activity monitoring

As regulation increases, so does demand for compliance tools. Chainalysis is the pick-and-shovel play for crypto compliance.

Data Network Effects

This is where Tavel’s framework applies perfectly:

  • More customers → more transaction data analyzed
  • More data → better pattern recognition and threat detection
  • Better detection → more valuable for all customers

Each new customer makes the product better for everyone. Classic Level 3 virtuous loop.

Both Sides of the Coin

Chainalysis serves:

  • Regulators/Law enforcement: Tracking illicit funds, investigating crimes
  • Crypto companies: Compliance, risk management
  • Financial institutions: Due diligence on crypto exposure

This dual positioning is smart—they’re essential infrastructure regardless of how regulation evolves.

The Broader Compliance Opportunity

Chainalysis proved that “picks and shovels” for crypto can be venture-scale businesses. Other opportunities:

  • Tax compliance: Crypto tax reporting is a nightmare (cost basis tracking across wallets, DeFi positions, etc.)
  • Audit tools: On-chain accounting and verification
  • Identity: KYC/AML that preserves privacy (zero-knowledge proofs)
  • Insurance: Underwriting smart contract risk

The Tavel Angle

What I find interesting about the Chainalysis investment:

  • It’s not “crypto-native” in the ideological sense
  • It serves institutions, not degens
  • The value prop is clearly articulable (compliance, investigation)
  • Strong network effects without tokens

This fits Tavel’s “experience/utility over speculation” thesis perfectly. Chainalysis would be a great business even if you stripped away all the crypto hype.