Friedman was executive director of the Seasteading Institute, founded on April 15, 2008, with a half-million-dollar donation by PayPal co-founder Peter Thiel. The Institute's mission is "to establish permanent, autonomous ocean communities to enable experimentation and innovation with diverse social, political, and legal systems". This was initially a part-time project — one day a week while working as a Google engineer the rest of the time — but Friedman left Google on July 29, 2008 to spend more time on seasteading. He and partner Wayne Gramlich hoped to float the first prototype seastead in the San Francisco Bay by 2010. At the October 2010 Seasteading social, it was announced that current plans were to launch a seastead by 2014.
Since attending the Burning Man festival in 2000, Friedman imagined creating a water festival called Ephemerisle as a Seasteading experiment and Temporary Autonomous Zone. Through the Seasteading Institute, Friedman was able to start the Ephemerisle festival in 2009, aided by TSI's James Hogan as event organizer and Chicken John Rinaldi as chief builder. The first Ephemerisle is chronicled in Jason Sussberg's documentary http://vimeo.com/11236146, and appeared on Google Maps satellite view for several years. Since 2010, the event has been annual and community-run.
On July 31, 2011, Friedman stepped down from the position of executive director at the Seasteading Institute, and remained chairman of the board. Later, he co-founded the Future Cities Development Corporation, a project to establish a self-governing charter city within the borders of Honduras.