Anatomy of a web3 startup (Chapter 1) by Patricio Worthalter | Devcon SEA

[Music] [Music] afternoon everyone thank you very much for coming I know you have plenty of options and you are very appreciated for being here and for listening what I'm going to present this is my sixth Devcon I think I didn't miss anyone in SE and it's the first time I speak so it feels pretty great um the content I have prepared I prepared very carefully so let's get into it um when I was thinking what's the best content I can bring to Devcon I thought well my work at poop for the past five years has been pretty intense and has exposed me to lots of experiences that unless you live through them it's somewhat impossible to learn of it's like in in startups you learn my doing so I was like Yeah I'm I'm going to I'm going to share what I've done so these are some little ballot points um one of my personality traits is that I'm um extremely UPF front about how I think so this is why the first type item is offering a filter firstand information of how to fils when a web startup um especially the painful Parts um I'm not here to sell you yeah I run a startup and things are going to be fine more like the opposite then um as part of our experience um I want to make clear what's different on the web3 ecosystem that the two than the web two ecosystems running a startup is extremely painful in all ecosystems but web 3 has several specific types of pain so I want to cover some of them and after all that pretty frightening information I want to present I want to still make clear that for for certain uh type of people not only it is worth trying it is what makes sense doing so we you will see why um a quick intro about me although I am seeing most of those that I'm seeing I know you and you know me but you may get some tidbits that you didn't know um I am 37 I live most of my life in Buenos ciris being in Buenos has shaped my personality pretty specifically so so it's a major piece of information Argentina has a very deep crypto tradition and that has given me a privilege view specifically for what crypto is useful for what's not useful for um so so that's that's a key part of how I got to work with where I am um up until 2015 um I had a pretty average Shob as a computer repair person I was a computer technician um in 2015 um I was pretty fed up with my lifestyle I wasn't happy how I was doing so I was seeking for a change um I was already somewhat into Bitcoin and I was like yeah I'm going to go fulltime on this so I went full-time into ethereum ethereum was an emerging technology that it was really hard to understand way harder than it is today and I spent the next three years 2015 16 17 18 um learning about ethereum um and and again it was a pretty steep learning c um I'm a high school dropout so I'm not a computer technician or any of those super fancy um educated uh ethereum people and by 2018 um not only I have achieved diminishing returns in um what I could learn but also the ecosystem was in a pretty unpleasant situation 2018 was right after the Ico Bubble Burst and and ethereum was in a very ugly bottom um prices were coming down DBS weren't working the road map wasn't coming together so that takes us to our next slide on which I plan on explaining quickly why in 2018 I I studed ethereum um in 2018 I gathered a couple friends and I convinced them on building an application on ethereum that can do something that you couldn't do with any other technology that was for me a way to show that ethereum wasn't just the technology for speculating with financial assets or for gambling or for criminal activities there could be things that you could build with programmable block chains that really solve problems that people have better than any other technology and one obvious problem back then and still today is that these days in our digital lifestyle we don't know nothing um all the information in your iPhones or Android devices and in many computers it's stored on the cloud and you're subject to certain policies and you don't have ownership of that information and it's very common that if it's no longer a business for your provider to uh serve it or host it they will shut it down or they will change the terms or or they will start churching you and one platform that's been subject to these issues was for sare for square was a a web CH app that you had in your phone and when you went to a bar or a restaurant you checked in and you got a little collectible now the little collectible wasn't on a blockchain it wasn't yours and when Forks Square decided to change Serv buiness model people that had thousands of Collectibles were left in the dark so I was like why don't we build an ethereum application on which these little Collectibles are nfts and because they mined on a blockchain they IM mutable and you have them forever and they have all the qualities that nfts have like like authenticity and um provenance and several other things that don't really come to mind so we start building this and it goes pretty well um we launch in 2019 well I have explained this already I messed up the um the order of the slid um so that that's the little intro of pup by the way there's going to be a pup at the end of the talk so you better get your apps ready and some other house piing stuff that's pretty fun now this um this way of coming up with the idea of pup out of wanted to show that ethereum was useful technology that makes sense brings us what it's the most obvious early organs of a company which is the idea and how to finance it if if we were analyzing major companies companies has plenty of organs like legal and H and revenue sales purchasing Etc but in an early startup you pretty much have someone the founder or the group of Founders that have an ideas and ideas are extremely cheap like like they are time do so ideas are pretty much worth nothing but when you match an idea um with a little source of financing at least enough for the founder to come by then you start having the embryony situation of an early startup and this is mostly what I want to what I want to call to cover today because um we could talk about the whole the whole day start about the startups but in the web three space we've been seeing and we continue to see extremely exotic ways of financing because of tokens and the possibility of creating crazy speculative mechanisms and although some of these mechanism for fin financing companies are fascinating and awesome they are at the same time what make a starting a web tree company pretty much a suicidal Mission um there's only a handful of cases of successful startups that had completed the cycle that started with an idea with some little financing and that eventually completed a cycle and have become successful sustainable profitable buiness business most of the crypto companies these days big and small are running on either extremely handwavy models or they have launched tokens and they are still somewhat holding up or maybe they are holding up really well but normal business that check the boxes of a business that makes sense I'm not sure I can count to 10 so I was talking about the different models of financing and of course we are going to talk about uh tokens but let's get um first to the easier ones to explain um bootstrapping web three a startup um it's a model of financing that I recommend a lot this is pretty much the founder of the founding teams running it with their own money not taking external capital and seeing how they could do it and this is a very valid model um many Founders um work full-time at something else and then the render start up on the side and only after validating whatever ideaa they had or finding enough traction they decide to transition to something else that's not bootstrapping so bu trapping um it's really easy to explain is pretty much not taking external funding the founder Carise the burden of figuring out how to pay the bills and the bills in web3 startup are extremely expensive for a bunch of reasons that we don't have time to cover then um there's another alternative for financing and we going to talk much about them because I don't think in this day and age it makes sense but it's traditional VC um traditional VC it's an extremely developed uh model it's been running for more than 20 years there's thousands of VC companies but in practice and and this is an unpopular opinion but traditional VC has nothing to do with crypto um crypto startups have a degree of uncertainty that just doesn't fit the model of traditional Venture Capital traditional Venture Capital has some um formulas and and um some models and time frames and many companies have applied in crypto I don't think it has ever worked I don't think it will ever work the only crypto companies that are financed by traditional ventor Capital are pretty much not Crypton native companies like the could be custodian um custodians or financing services or compliance or legal or KC that kind of is maybe could qualify by traditional BC um but in my personal opinion um if you are building a business that qualifies for traditional Venture Capital uh go for it the content I'm presenting here might not be too useful for you um but surely the point I want to make clear if you are a crypt native company building a crypto native business model it's highly unlikely the traditional Venture Capital works for you and traditional BC may want to believe that it could work you are going to waste your time and now I'm going to skip for a second uh crypto Venture Capital because that's the hardest um the hardest one to grow and explain and I'm going to explain the grants and exotic financing um because that's underexplored and it's a very viable model for aspiring Founders these days as sping Founders these days when they have an idea um they have pretty much the three options I mentioned bootstrapping which is probably not viable unless they have lots of money or some money um crypto Venture Capital which I don't recommend unless they're extremely sure what they are doing and then there's this grants and exotic financing grants and exotic financing means there's plenty of organizations in crypto that have more more money than what they know how to spend this can be Doos they can be foundations they can be individuals and there are plenty of individuals there are plenty of whales that you may meet at a conference or in a hallway or in a local Meetup and you present an idea and you're like yeah if I had $50,000 I could build this this and this and this happens more often than not there are even some success stories of companies that is staring out of Grants or this kind of financing and have grown to eventually raising Millions from BC so Grant and resting financing it's a very valid and very honorable um way of raising capital for an early web3 startup that I absolutely recommend and then and I left it for the last um item on the four models that I presented it's traditional Crypt BC unfortunately traditional Crypt BC has evolved naturally I don't think anyone specifically wanted to go that way in a perverted model of um greater fools there are plenty of highly skilled with plenty of social skills and abilities investors that are meeting founders with ideas in need of financing and they will convince them or they will promote them and help them do a token Finance comp company and that's pretty much a dead sentence it's a minimal chance of long-term sustainable success that a Founder uh gets when they sign a deal with a VC that expects a token there are so many highly computed mechanisms that start to play that even if the business makes sense and it grows and it checks all the boxes they typically burn the founder out um Founders burn out it's a a pretty pervasive um condition in this industry and tokens make everything 100 times harder so um my recommendation is that first time Founders avoid BC even if you believe your idea is crypto BC even if you believe your idea is great um only Puro Crypt VC if you have a solid plan that really checks the boxes and doesn't have the classical hand wavy um um models like yeah we are going to race here and we are going to ship this and eventually we are going to launch a token and the token price will pump enough that we are going to have uh so much money to continue Building without worrying about Runway that's a success stories for vs and I don't blame them but it's this thing that I call it a suicidal model and a Deb centers for Founders um eventually the model um of Crypt BC when the regulatory landscape gets better may have a second shot and it would work but in this context on which tokens can't do profit sharing or any kind of Revenue sharing or tokenized Equity um everything token govern whatever or utility token or all those things they are ill fate they are not worth pursuing and it breaks my heart I met some uh some Founders this week I I I've done in my career over 200 Investments so I must have I must have talked with a thousand Founders it breaks my heart when I meet a Founder with a good idea full of enthusiasm that is about to sign a term sheet and do pretty much this Devil's pack that's going to drain that energy um so again my recommendation is unless you are extremely sure and well advised and well contained on what you what you are signing up for just chill and continue your crypto Journey because right now the EOS system and everything around is such a mindfield that your chances of survival are so little that the trade off the the risk reward ratio is not worth it um now I don't have have much time so I will come up with a couple before the questions with a couple housekeeping items um I plan on doubling down on the contents of this talk in an upcoming conference I don't know which one is going to be um but hopefully what comes next after this we will cover sometime in 2025 um of course I'm I'm very keen on answering questions but I also want you to know that because you came and listen to all this rant that I had prepared um you're going to be part of a pup that we will all share and that pup can be minted um using two mechanisms one it's a secret word that you just Ty in the PO up and that secret word is Collectibles the other one if you don't have the PO app is that QR code which I'm going to try to scan now if you don't mind this poab can only be minted while we are here it looks like mine is minting um but then there's going to be another po uh for those that are watching the live stream or the recording which is going to be for sale for 01 e or something with the proceeds going to the nonprofit Foundation it's taker so I'm going to get to the other slide and I'll leave it for a few seconds um this is called an Airship uh and it Plains where to set the funds and the PO that you will get and some other fun stuff this is not particularly for you to read it's mostly so it is on video and the last housekeeping item which is a fun New Lounge that we are doing uh today it's a shps minting um this is a way for minting a power bound to a geographical location this one is configured um for anyone that's on the range of 7 kilom from this venue so I encourage everyone to do the scan location button in the PowerUp get that really fun PowerUp and hopefully one of the all the MS randomly picked um is going to win one e um so with that I think we can move up to the questions all right awesome awesome let's go to the Q&A you guys we have the QR code on the on your right side and send him the question whatever you have question question for him are you ready for the question I am all right let's go so we can have so many question here and if you already have some question that people ask for that you can just upboard it anyone I mean he did really great presentation right there's no question for him at all all right don't be shy yeah and and you guys have have the p app apps don't forget to use the scan the location and you can get the p app like from Bangkok here right yeah and of course I'm planning on being around the venue um so if whatever you want to talk send a question can you send a question to this one so people can can see the question too so you can use the camera to scan this and you send the question through the screen is that working all right one second maybe we can get oh my okay his microphone's right here oh who want to ask a question see that guy okay uh just a logistical thing how do you choose um like how do you do the randomness of the function to pick the winner of the one if like is it chain link is it onchain are you using any hand I love this question uh you know why I love it because we have worked really hard for the system to be probably verifiable um we didn't want this to be like yeah he has one so we use a product called uh po. fun po. fun is an open source software it's not set yet you can check it out but it's an open source software um on which um the system gets all the poops ID and those IDs are tickets for a raffle and at a given time there is a little super basic formula um that uses the gas usage of a series of log and when the number of the gas usage matches the hash or the number of whatever the ticket was uh that's how it makes a leaderboard and I think it it does like knockdown system so it's it goes knocking down people and the last standing winner gets a priz um we specifically wanted the system to be probably verifiable and credibly neutral because otherwise why could we do it at all all right we have like a lot of question so we have about two minute a little bit so let's pick a few question you can see down here yeah how to ask to the VIS that ask for token I think if you don't have a very good answer for why your product needs a token you have nothing to do with tokens and you just have to accept that you shouldn't take funding from that BC and this is extremely painful but I am uh pretty straightforward you don't need to work with BCS that uh want the token even if that means that you cannot run your startup if your startup cannot be run without a token if you cannot get financing without a token you probably shouldn't push you it um tokens are useless not at all tokens are a fascinating cordination instrument I expect tokens to create a revolution in human cord scale it's just that in this day and age with the regulatory constraints you cannot use tokens as means of financing um what are the best and conventional ways a Founder can fundraise for an idea or an MVP they have um the easy ones it's a larger L the larger THS of el like carbure mon optimism and there are many more mantel it's another good one they have huge am of money they aren't afraid of spending if you have an idea you just need to come up with a minimal expression of it something that can be built with 50,000 100,000 200,000 and if the idea is good they will love funding it uh you didn't tell the story of how po was funded oh this is not a secret I funding it myself uh po when po raised money for the first time I was already several million dollars down in in uh in spending and even after we raise VC money I continue sing more and more money it's impossible to run a company that doesn't have a token and and goes at the speed of web tree without a really deep pocket uh so so again this is something that needs to be known for an aspiring founder we have one more EXT expensive we have one more extrait for you so you have a lot of questions so we have one more minute extra for you guys thank you um when po talken we have no plans for a token um if the regory landscape changes a lot maybe one day we reconsider it but it doesn't look like it's changing um what's the business model of poab poab has two sources of revenue um one it's Enterprise Partnerships uh we have plenty of companies uh that hire us for helping them do preious visal Collectibles this company services is like mercedesbenz American Express Porsche Goldman Sachs Swift and hundreds others and similarly uh we also make money by individuals that buy their mindlinks and they pay $25 per 100 pups and that's working pretty well the market is really small there's like 10,000 people in crypto that can appreciate PowerUp well so we don't make that much money with that um but we expect this model to scale very nice once the market picks up um AR a good option yes definitely ancient investors are in the category of exotic funding so I certainly like that um follow me on Twitter to see where