Should a business start with a token?

Transcript

g m g m welcome to another episode of web3 Academy your one trusted source to capitalize on the next big phase of the internet don't get caught in the hype cycle at Jaybird joined by my co-host Kyle reedhead and we're carving a path for doers to confidently build and invest in web 3. hi what's going on brother welcome to another episode I'm excited to be here it's a bit hot our power's out but thankfully we still have internet but that's why I'm in a tank top if anyone's looking at me this isn't what I would normally like to be wearing on a podcast but it's hot I have no AC so gotta let the airflow you know you might not have internet but you've got a beautiful background you got a beach outside your door I shouldn't say you

know you have internet you might not have power you know it's it's the take of being a Nicaragua right I'll take nature any day nature in good ways I'll take that any day I love it all right so today we're talking about should you start a business by launching a token and this question came up last last week in the roll-up when we talked about three new projects that all are starting a business by launching a token first we talked about Pepe I mean we all know what's going on with Pepe just seems to be going to the moon but a new meme coin we talked about LimeWire which is basically rebooted themselves as a web 3 company and are launching a token actually next week and then we talked

about Smurfs which somebody bought the IP rights to Smurfs the old TV cartoon and they launched an nft collection in order to raise Capital to start their business we've seen this these three examples are not the only examples we've seen numerous examples of this over the past few years and it got Kyle and I thinking is this a good idea is this the right way to raise capital for your business so we're going to debate exactly that today we're going to discuss if you should launch a token if you are going to launch a token should it be an nft or should it be a fungible token we're also going to look at the

investor perspective if you're an investor should you be investing in these businesses that are starting by launching a token which we're seeing happen a ton right now and we have some time at the end we might even get into the question of if we look into the future decades from now will every business have a token something kind of been thinking about and wondering where that will go we got a great show today we're going to discuss all of this before we jump in we just need to take a minute to hear from our sponsors the future feature of social media is here and that future lives in web 3 on top of lens protocol web 2 social platforms are broken and right for disruption you see the epicenter of social media is the creators and yet they are the most neglected web 2 platforms like Facebook

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3 conference all right welcome back God I'm going to start by asking you the simple question is it a good idea to start a business by launching a token I think the answer is it depends it depends on if you need funding or not there's a few ways you can look at it one there's lots of different use cases of why you would use a token right I think most in the last few years are around funding and so if you need funding for your business then sure it can be a great way to do that it's a lot less friction than going the old school route of getting Incorporated in you know whatever country you're in and then getting a bank account and you have to go through accredited investors and all

this kind of stuff like it's a hassle especially if you're in the US and then you also can't it's very difficult to get funding globally right and so if you have a community already or you have a following on whatever social platform it makes it much easier to get funding if you do it via the blockchain Via token rather than the kind of traditional way so like if you need funding sure it can be a great idea as an entrepreneur myself like my advice or just kind of my motto is like I do everything I possibly can to not require funding the last thing I want to do when I'm starting a business is have to answer to someone right the whole purpose of me starting a business is so I can go at the pace I want I can live the life that I want I

can make the decisions that I want and I can build the business that I want right yet if you want to start a business from scratch and you're gonna do that via getting funding and now you have to answer to people like it's already stressful enough to run a business now I gotta answer to you know VCS or whatever like to me that doesn't interest me but also it depends on the type of business like okay you're starting a media company where it's like a newsletter and podcast hell no you don't need any funding it would be ridiculous and just stupid for you to try to get funding whether it's traditional or with a token doesn't matter your means of getting the funding make zero sense you should be doing everything you can to like make your business your product whatever profitable before you even need to even

think about funding right now if you're starting a tech platform and you want to go up against I don't know Instagram or Tick Tock you want to build the next social media platform okay you probably need some funding sure that type of business makes sense but if it's a Creator business if it's something that doesn't need funding absolutely I would not start with a token at all I would focus on the business and building something of value then later I would use the token maybe for funding but probably more for growth kind of like what you saw with like the arbitrums and the optimisms where they already had a product it had utility and now they're using it as like a retention tool to keep people around to help fund their Community to continue to build so like you got to think of these tokens as something more than just

funding and like only get funding if you actually really need funding what are you saying yeah you bring up a bunch of good points there I think the first point you bring up is very simple which is if you are starting a business where you can make Revenue on your own then I don't raise Capital why would you right if you launch a business and you raise capital in the beginning and let's be clear when I say raise Capital I'm saying whether it be a token sale like a fungible token whether it be an nft or whether it be more traditional routes going to a bank or going to friends and family or going to a VC like there's many different ways so if you and make Revenue don't raise capital in the beginning

make revenue on your own prove product Market fit proves that you actually have a business that could do something not just a business plan written down you've created a product the customers care about it and then decide okay whether or not you should raise Capital based upon your growth objectives as you just said Kai all based upon growth if you want to scale then capital is a great thing to do because it can lead you to scaling at a much faster rate because all of a sudden you have a huge cash inflection and you can hire people and you can spend more money and all of that so I think I agree with your your answer it depends that leads us to the question of like it depends on what so the first

thing we're saying is it depends on whether or not you have Revenue right if you have Revenue you don't need to raise Capital if you don't have Revenue then maybe you do you could have revenue and still want to scale faster or still I need to hire more or do build another product or whatever so like it's just if you need more capital is that the answer what you're trying to say revenue or not if you need more and that makes sense for your business at that moment it's a good opportunity because you know you're in a secular trend of something and you can capitalize on that opportunity right now if you get a bunch of capital you scale and you launch and you beat competitors or whatever okay it makes sense right but if it's just a business that's like slowly adopting and growing

like whether you're making or not you probably don't need it unless you're running out of money for some reason okay so then let's assume that you want to raise Capital as you said there's a reason why you want to raise capital okay let's talk about the different ways to raise Capital because the real question that we're diving into is is this new way of raising Capital this web 3 Way of raising Capital with a community is this a new playbook that entrepreneurs and Founders should be seriously looking into or is it just a fad and a trend because basically everybody if you drop an nft you're going to get a lot of Attraction from the web 3 world there's a lot of djans trading right now or if

you drop a token and you have a good meme you're going to get a lot of energy you know is this a fad or is this the start of a new playbook it's definitely not a fad it's a 100x better experience to fund via a token than Fund in the traditional way right there's no friction there's no cost it takes one second if I was ever to raise I would never do it the traditional way now I'm an internet native I get the stuff that makes sense to me like that's why I would do it in the future and I don't know how long that takes there's no way anyone ever does the old go away in the future right why would you go and I don't even know how you would do it now like go you got to open up a bag and then like

you gotta get Incorporated and like you got to get the lawyers to get your shares and blah blah like it's insane that we even do that when I can go click a button right now on one platform and boom I have it all so like for sure in the future at some point it goes away now when that happens I don't know because we also have all the issues with the SEC and regulations and like how that all works and so it's probably going to be a pain for a while but if you don't care about that I guess then I don't see why you would ever go to the old school way again if you do it in the U.S well I guess the other thing is if you're raising capital and you want like legit VCS they probably aren't going to buy your token but they will do it if

you do it the legit way so I guess you want to raise Capital to from like you know those who are also going to give you the knowledge and and resources that's when you might go the traditional way I guess eventually though I think it all goes Unchained that brings up a really good point is okay what's the difference so you have a business you're ready to scale at whatever phase you're at you need capital okay let's talk about the difference between going the token route versus going the traditional route because there is a lot of differences right not just the friction like yes I understand there's the friction difference but there's also differences in terms of who your investors are that's the probably the biggest difference right you go the BC route or the more traditional route your

investors either they're your friends and family right yeah or they're some form of a VC or private Equity or some fund that puts money into new startups if you go the token route their internet strangers so to speak I mean you can do closed Capital races with tokens as well and I just don't know that you'll get all the legit VC so you could do either way you could do it privately you can do it publicly it's not always going to be an exchange just but you're right it's definitely a different subset of people that you'll get that will invest if it's on Chain versus not the other thing I would say and this is more on the I guess technical side and like the use case side is when I think of a token to

raise Capital that's on Chain versus not I think of it as like programmable Equity right so like when you raise capital and you give Equity it's just that and there's nothing else you can do that they just have a share a piece of paper and like that's it but when you tokenize it it's programmable and now you can do more things with it you can have voting involved with it you can have like access to things in the internet with it you can then take those tokens and now give some out to the community or you know you can start to use it in your ecosystem of whatever the tech platform or whatever product it is that you're building where it becomes more than just equity and it can morph into something else like what IMX did IMX or immutable their token used to be

just kind of like in some of an equity play now it's like ease for their platform out of nowhere and now you can stake it and you can like do things with it right so like I think of it as like programmable Equity where you can eventually do so much more with it so again it's 100x better Innovation than the old school way for sure we the type of token that you're talking about though is a fungible token where it feels like Equity right it is very close to equity right it's not exactly Equity it's Equity plus the last thing is programmable Equity it's Equity plus you can do so many other things with it right you could think of nfts as being Equity as well if it's set up that way right it just depends on how you set up

the token but both fungible or non-fungible tokens they're just wrappers for some sort of utility on the internet right whether that is equity or not Equity it could be anything yeah but with an nft at least the way it's been done so far as an nft owner I don't feel like I have equity in any of the businesses that's because you don't exactly because I don't right you could you could but it's not the way that it's been done so far whereas a fungible token feels much more like Equity because you have ownership of really the token which is the center piece of controlling that business I would say there's also a lot of fundable

tokens that don't do that either true so right you gotta you gotta really be careful but let's let's assume that both are acting in the way that they are giving Equity I see what you mean a fund which I could just see more and like I said though like I don't know if we want to get to the conversation of do you use nft or do you use like fun to learn non-functionable token yet but like on the programmable side I think there's more cooler things you can do well different things I guess you could do with nft because like if I'm ever going to raise capital I think I would use an nft because one I could limit the amount of people that have it and which kind of a smaller subset of people but then I can put branding on it to me I think

it's so smart as much as they hate the whole craze of these 10K pfp nft Collections and stuff like I absolutely just it boils my blood I think it's mostly trash I do think that if I was to raise capital from I don't know 500 people 1000 people I would create art around it and I would make an nft and then they can now feel like they're a part of a community and like have branding that represents whatever the thing is the businesses that I'm funding for and like they can now have it as their Twitter profile picture and stuff and like that helps The Branding of the business it's a great idea again it kind of goes further on the programmable Equity right but now it's like branding branded Equity almost you don't get that in the traditional world like I get a piece of paper that says I have Amazon

stock I'm not going to use that piece of paper on my Twitter profile I'll just say hey I'm an investor Amazon you know what I mean but like Moon birds for example you invest in equity but let's say it was you might put that Moon bird on your profile picture because you're part of something bigger you know you mentioned one of the key reasons you did an ift is because you can limit the number of people why would you want to limit the number of people that's a good question I actually don't know I think that if I was to ever do funding for my company I wouldn't do it to everyone for internet strangers like you said I wouldn't do it that way unless it was a Dao but I think that's a different thing if I I was looking for funding I wanted

to be more strategic and I think I would like I would private sale depend on the business and how much I'm trying to raise but that's what I think I would do and the main reason it sounds like is because you want to control who your investors are basically right because I'm guessing you want investors who can contribute to their your business give you advice and can be mentors you don't want a bunch of Internet strangers yelling at you and Discord being like when air drop why is my floor so low right now I would not do that I was just saying unless it was a dow where we're trying to make this like Global thing and yes thousands of people a part of an organization then I would definitely do that way because that's the only way to really organize and structure that

usually if you're getting funny for company it's I don't know it's you and a couple people and you have this great idea and you want to just go execute you don't want to deal with all the the right it was good to say exactly what you just said about the doubt I think it makes sense to fund with a token when you have I hate to use this example but like Pepe makes sense to me to fund as a total because it's a joke great like you have a joke you want to have fun you have a group of people and you're just trying to have fun that actually does make sense to me tokenizing a glutenity exactly yeah yeah and so like that makes sense to me because you don't really necessarily have an idea you just want to bring a community together and create

a way for you to coordinate and you believe that people all around the world care about the same thing that you do some green frog and so hey let's all get behind this hitting frog and come together and it's had to even the line where Lamar snow where they're launching a token same sort of a thing and but they have an idea in a business they're going to build and they want to build the platforms they need funding it's like go for it that's a great idea too it makes complete sense one thing I think we should talk about Jay is for those that are investing in this stuff so now that it is possible to raise capital from non-certified investors yeah basically they give to be a certified investor an credit investor credit yeah you have to have like a million dollars or a hundred

thousand dollars something like that I think it's a million dollars and over 200 000 of annual income I think it's something like that right like it's very restrictive basically it means the rich people are in it and everyone else is out it's the exact same reason why we love real estate as tokenized real estate because everyday people can't that's the real estate you tokenize real estate everyday people can invest in it with much smaller amounts a hundred dollars ten dollars anyways so now that you can as a non-accredit investor you want to put your side blocks into this Pepe company or whatever here's the thing that I think people need to understand that this has kind of change the Dynamics of investing when anything can be tokenized like what we're saying is you can start a business that is not yet even a

business and you just tokenize it and you get a bunch of funding and it can be millions of dollars and you hope that that team actually executes and build something it's a seed raise right it's the same as a traditional world where you have an idea and you go and pitch a bunch of VCS and they give you a seed race so they give you a bunch of money take a percent of your company and you don't even have anything to show for it yet it's just an idea but they trust you or they just want to put a bet on you now most of those 99 of those businesses those Endeavors don't work out if you are investing in one of these things there's a really good chance you're gonna lose your money so like don't go and put all your money in LimeWire because it is one

of these seed Investments right and the only way that these VC firms make money on these seed Investments is by investing in thousands of them over a couple year period they have a fund where they raise Capital they invest in thousands of them and then a couple of them become the next Uber and they make hundreds of millions off of it and that's how they make up for all the losses of those thousands that fail right I just think it's really really important for people to understand that when you're putting your money in coins we call them tokens that don't represent anything yet just an idea 99 are going to fail and so that means that you have to put money in 100 of them to maybe make money on one of them right maybe most people listening are not putting their money in hundreds of these

no tokens I don't know it's important for people to recognize that it's the chances of you making any money on this stuff is pretty slim you got to be careful I love that you brought up the investor perspective the analogy that I like to use is that investing in a token whether it be nft or fungible is the equivalent of investing in a business at the start of the internet an internet business is sort of the internet and the only examples I would use now are the ones that made it right head started like you are putting your money into one company I think a lot of people think that they're investing in nfts or they're investing in web 3 they're investing in this concept because they're like oh my gosh everybody's

talking about web 3 and nfts it's all going to go so well from that perspective there will be lots of businesses that fail the same as their was at the start of the internet some made it and some failed and so investing in one project as you said Kyle it only works if you're going to invest in 100 of them and hope that one to ten percent work out right is your range you're looking at the alternative and why we believe so much in investing in the infrastructure layer of web3 like the layer one or layer 2 blockchains or like Bitcoin is because those are much more as if you could have invested in like the internet at the start of the internet right which wasn't possible there was no internet

company that you could invest I guess AOL and tried to be that one they tried to control the internet but that was centralized this concept of decentralized companies didn't exist so that makes sense to me which is why I always say I wish I hadn't bought nfts and I wish I just kept all my money at East but buying nfts is fun and as you said Kai this is why I think a lot of people would really do buy nfts is because well they eat is kind of boring for a lot of us right I know you love it but it's true right so a lot of people end up okay what can I buy that's more fun oh I can buy this nft it's a image it does something it gets massive Community whatever blah blah blah blow up like five to ten percent a day how is

that not fun that's not not enough it also goes down five five that's what I mean when you're talking fun this shit's crazy already now people want to go even farther down the risk right it's just mind-blowing to me so here's our summary start a business by launching a token it depends but most likely no you should not the only reason you should is if you want to build with a community basically and that's and a dow wants to do that you don't necessarily have to be a dad to want to build with the community but you need to want to build with a community it's not a consideration to be taken lightly that is very different than building with a small team and a small number of investors and not having

to deal with ten thousand or a hundred thousand people on the internet yelling at you about their investment so that's the first consideration if you do a little on J token should it be a nft or a fungible well that's another key consideration to make and that depends ends upon really what you are trying to achieve I think long term nft does have more potential right now there's a Simplicity to fungible that I like though and that it's only monetary and governance and there's nothing else nft I think we will see use cases where people do nft but right now it almost just seems too complex to me interesting I would say that it's less complex you

don't have to worry about tokenomics on the financial side it's true it's a lot like unlocking and how much do you get here and splitting intro is like nfts are just much more simple I think but I don't know it depends they're still tokenomenals in nfts it's just very simple right like your supply is is much simpler but you gotta think about Rarity now and that impacts tokenomics and you got to think about anyways oh you don't have to think about Rarity that's just people who are making weird characters you don't need any Rarity for an nft that's ridiculous you can just have ten thousand the exact same things and that's just people who hold a share in your company and that's it don't need any Rarity you don't need any traits that's just for

people playing with animals if you want to add more complexity and more fun or whatever like you can program those things in and that's where Rarity trades make sense like you don't have to have any of that that's relevant to funding a company final thing on the wrap is if you are raising Capital before you even decide if it's a token or not a token you need to really decide if raising capital is the right thing for your business and that is a key question basically its own question to ask in the beginning and I think you and I both believe that you should not raise capital at the beginning until you've achieved some form of product Market fit you've

done market research you understand your customer you know what they want and then go into raise Capital unless you're trying to start the next space book also because you get one shot to launch token and one thing you understand is like sure that token you can think of it as raising funds it's also like that steroid boost for growth for retention for like all these things around either your community or business whatever right if that token does well you're gonna win over a bunch of people right the token does not do well you're gonna lose a bunch of people and a bunch of people are going to think your Project's a scam or it's or they lost money and that that's a really bad branding for your company right and so you get one shot and so in my opinion it's like

you want to build either a strong business or a strong community that like Gets behind this thing before you go and launch it and then have a purpose for that token that you're launching and have a means to like make that thing actually have demand so that it doesn't just get inflated away or like go to zero right because if you can do that it's going to be one of the best marketing tools ever for your business I think arbitrimp did an incredible job at they waited and they waited they waited until they built this like really good product it's been like tested and battle tested and they had a huge community and they rallied their community and they had all these Dows and all these protocols building on top of their platforms like they had product Market fit and they had community and then they

launched token which just supercharged it right and so it supercharged their Community it's supercharged all of the businesses building on their platform so Network effects can really take off because every single user got money all of a sudden so cool and now a lot of people just sell that and forget about whatever but the amount of business is building on that platform that also now got funding and can now use that token to fund whatever they're doing and fund hiring and all that stuff like that just really boosted the network effects of arbitrim itself if Arboretum launched token way before before no one was building on it the benefit is actually quite limited so they waited until that opportune moment and also I think Arboretum Sally okay we're going into probably a more bull run the the

on-chain activities start to pick up this is the chance to like light this thing on fire and go for it right so like they really had a lot of I think strategy around when they launched their token as well and I think that's also really really important to consider yeah the thing is not everybody out there is trying to build Arboretum building a blockchain that is a different level of building a business even let's say you're building a media platform you're a Creator and you have I don't know an Instagram following or a newsletter or a podcast or this kind of stuff it's like you could launch a token in the very beginning and maybe you have a couple followers that you know invest in that hold on to that great or you could weigh it if you have 50 000 followers or 100 000 followers and you

invest it with more experiences around it and more utility for it that token's probably gonna do a lot more for you at that moment than it did back when you only had like 50 followers you know what I mean I think there are more opportune times to be using this plus oh so you probably didn't need any funding if you only have 50 followers and you're just creating a good newsletter you know what I mean like you don't need it well the other interesting thing is like this conversation all revolved around a token being used to raise Capital but a token doesn't even need to be used to raise Capital you and I both believe that the use case that's really going to explode over the next two years is not the financial aspect of tokens but rather the free tokens tokens that are used for

identity tokens that are used for proven greater ownership for loyalty like all of these things I don't want to talk about that I bring that up only to mention all new tech is challenging because especially blockchain it's so wide and it's ability to be used but people learn one thing and then they attribute that thing to that yes right which is why people have this like bad perception of nfts because they're like oh it's a monkey and then they just think all nfts are now a monkey and it's like no it's not a monkey but it's many things and it can be many things Financial non-financial you can do a lot with it all right let's wrap here final question to ask you our listeners we want to know if you think will every

business have a token in the future and if you're listening on Spotify scroll down and you can answer the poll yes or no and then I think what we might do depending upon the answer is we might debate that at a a future debate because it's very interesting to think about will all businesses have a token and how will they be used and what will that look like a decade from now guy any final thoughts yeah I'm gonna answer the question of the golf is just kidding uh no we'll leave that one another note what do you have to say we're teasing we're teasing here all right thanks so much for listening and everybody have yourself a great week make sure you check out the other podcasts this week make sure you check out Webster Academy Pro if you're not already subscribed there thanks so much for your support we

love you guys have a good one thank you for listening to web3 Academy we hope this helps you along your web 3 journey and if it does please share this episode And subscribe so you don't miss the next one nothing in this podcast was Financial advice crypto and web 3 can be risky you can literally lose it all in fact if you invest on account of what we say you probably will lose it all so don't do that in all honesty the point of this podcast is to remove the noise of markets and price and focus on utility and implementation anyway so you should not take any of this as Financial advice thank you friends and see you in the next one