Cracking the code: Navigating tokenomics for successful fundraising - Konstantin Molodykh | Mezen.io

thank you so much hello guys oh yeah you can hear me or does it work yeah nice uh so good afternoon everybody uh how do you like this conference have you tried already some rakia here okay uh so my name is Constantine I'm the uh co-founder and the managing director of misen um and just a few words about us um and my uh trip here uh I mean I came by plane uh basically and um before misen I've been working in a VC fund uh with 400 under management and uh we had a focus on uh fintech and crypto uh and while I was working there I've met uh my current partners and the guys who we are working at the moment uh and they and they were portfolio managers at the crypto hedge fund uh and uh like two years ago or something like that we started to work with different projects here and there helping them with their toomics business model strategies fundraising and uh basically this uh was our main uh business that we were doing uh from uh like two two years ago and at the moment we have approximately 15 people uh in our team and we have completed uh over 30 projects for the previous uh year uh so uh we work a lot uh with Founders uh and as a Founder you usually um see a token as a fundraising tool so this is usually the main purpose so actually it could be a great idea just to raise some funds uh to make a lot of money to exit to forget about stuff uh to raise uh funds like uh to retire for the entire life go for Maldives or say or whatever and just uh relax but some of the founders want to develop the project develop the community uh develop uh technology and that's why it is important to think about uh the token in other ways also so uh you should uh think so uh usually Founders think about how to incentivize uh their Community how to decrease customer acquisition cost how to increase the retention of the users and basically these are the most important things that Founders are thinking when they try to develop the token but uh speaking about the most important thing is raising money uh and raising funds for the further development you should think about the investor what uh do they want to see in your project and uh here are like four I I believe main ideas of what is very important for uh the investor of course they are looking for the high upside they want to have uh 10x 100 tax on your project that's why they investing uh and basically your uh opportunity should have at least 100 uh million potential marketing Revenue just because if it is a small Market there is no interested uh in it so they will just keep this opportunity of course there should be uh some kind of a proof of demand because uh if you have already some traction you have already users you have MVP you have uh done something uh then you can go uh to investors to VCS and uh try to raise some funds uh and of course uh at the beginning of your uh Road uh in this uh Big World of business uh at the seed stage the series a uh so at the beginning uh investors uh look at your team uh and usually they invest in your team and your ability to execute your vision to execute your idea uh so they measure how uh does that make sense uh for them that you have that experience probably or you have that ability to manage that and of course they are looking for an exit opportunity and basically this is uh the place where the tokenomics uh starts uh to develop and uh here is uh her uh its place so the exit opportunity is uh the investor want to understand that they w't lose uh money while they are investing uh in your project uh so they want to make sure that they will uh take it in the future maybe in one year two years or whatever it depends on your toomics So speaking about uh toomics uh there are like three main pillars uh utility Economic Security and uh value capture So speaking about uh value capturing mechanism uh it's when your project is developing is growing and let's say you getting more and more users you're getting more and more Revenue you uh value locked in your project in your protocol and Etc and the price of the token is also increasing so this is uh the the main thing when you have the alignment uh between the token and the project uh the second thing is uh Economic Security this is about allocations this is about vesting this is about how the investor uh will be sure about that uh these projects Will Survive uh this is also about these death loops sustainability Loops that we'll speak later and about utility this is how uh your ecosystem can use uh your uh Community can use your token uh and why do your to do your projects need a token at all because a lot of people just try to uh put this token in every project just to raise money and then you try to understand well does this project need this token at all or not so uh moving forward let's speak first about the locations then about the sustainability and utility So speaking about uh defining these are the maybe five the most important things in terms of uh developing the allocation for your uh project and you should understand uh the clear uh objectives for every part of allocation uh just because if you don't understand how much are you going to raise uh in the future uh how much are you going to uh provide the airdrop and uh how much you going to spend on marketing uh this will be very hard for you uh to develop the toomics especially you should think not in terms of uh tokens but in terms of uh dollars how much you're going to spend on this or or that so uh as for the second point this uh to segment the investments into round uh usually you should understand how much money you should get attract to get that product into the market to uh maybe become profitable to get a community or Etc so you let's say uh have to raise 100 Mil and uh you can just sell it right away and give uh 50% of your tokens to the investors uh but basically it usually doesn't work uh so you have to uh split this rounds into uh this amount into several rounds and uh you will have different valuations on every stage uh at the beginning you will have smaller valuation and you have you will have you will raise let's say 1 million and you will uh let's speak in terms of real cases approximately the beginning you will have 10 to maybe 20 million Market valuation at the beginning so uh providing maybe one or two million uh raising one or two million you will you will give 5 to 10% at the beginning and then you will maybe get uh public rounds or Etc with a high valuation when you have developed already a little bit of the project and you have some traction uh as for the benchmarking you should uh have a look at what happens in the market uh how many uh how much money does uh other projects raise how much do they allocate for uh let's say investors or other allocation for let's say marketing or Community Rewards or Etc uh so one more very important thing is transparency you should be very transparent uh about your to economics we will uh discuss some of these points with cases uh just in a few moments and the transparency is about that everybody in the community should understand uh what is this allocation about uh so is this for uh let's say for this investors or is it just a community and you can uh spend this money this and these tokens uh like um how you would just imagine that just to give your family some tokens to this ql or Etc so this is about transparency and everything we should everything uh should be clear in your white paper and uh all of all other materials so this is one of the cases uh when the team had a big portion of uh allocations into different uh into different uh chunks uh allocated to somehow related to the uh Team so they will be able to sell it while they will need some money uh and actually if you have that tokens in your hands and you can sell it there is a very high selling pressure on the token uh so you basically don't want to uh be that greedy and to take uh such a big chunk of uh tokens for uh the development of the project it is actually a good idea to locate uh more uh tokens to the community also one more actually all of this all of the cases are uh real cases and uh we decided to skip some of the names just because we don't to uh make black PR for uh these tokens uh and we can discuss uh these tokens like later if you want uh so uh as for the Egan layer uh there is a very good example uh that uh they provided an error drop and they allocated 15% for the air drop and the community was not very satisfied with that just because they provided the rules to get that air drop and uh the most amount of liquidity that uh was provided to the protocol was from Canada Us and other countries that were restricted uh from this list of the air drop and that's why the community was absolutely not happy about that uh the other uh thing was that uh these tokens were not transferable so you will see this uh on the website that okay yeah I have it but anyway like you can do nothing about that and you have absolutely no vision about what will happen in the future with uh these vesting Clips or whatever so you just have this number on the website and no guidance at all and the second thing uh was that uh there were two seasons and there were absolutely no rules of how it will happen so uh the the the problem was here with the transparency so the community didn't understand what uh was happening with their tokens and what they will get from that uh another thing is about uh aligning the interests of investors and using the benchmarking uh and trying to understand what happens in the market so actually this is the example uh of when the team uh vesting are uh shorter than investors uh vesting and like investors just see this toomics and they understand that uh the team is not interested uh in the long-term development of the project uh they will get uh 15% air drop at the beginning uh well it depends it could be a good idea but um we should dive deeper into a specific uh toomics and specifically this case and as for Qs this is also is shown that these ke are absolutely not interested in the long-term development of the project so investors will just skip this investment opportunity because they have no idea why this should work because they will just uh get away with this uh I mean ql steam will uh go away with these tokens and that's it so speaking about uh the timings in the market uh we have spoken to uh different uh VCS and investors and they tell us that uh if you have a tge uh before uh the December of this year okay you uh they will speak with you uh just because they understand that uh usually they will have a cliff of six maybe to 12 months and they will won't see uh their tokens at all just before uh the the end of the uh the the end of the bull market so it's not interesting for them to get the tokens when it is already bare market and uh the valuation of the of your company is very very low so that's why it is very important to understand and align your road map and strategy of your uh fundraising uh with the market uh so this is the idea so you should uh try to raise funds uh as soon as possible and to do the public round uh at the top of the bull market Market just to raise uh as many uh funds as possible to go through the bare Market to develop that project to um be very strong at the beginning of the next one uh and let's speak about the utility uh these are uh the main ideas of the utility one more time you should have the clear purpose of your token just because uh I I've seen a lot of projects that just want to use this token and they uh tell us like uh do whatever you want we want to raise the funds like the there is no clear purpose of the token and your project should not get this token at all so this is the Cornerstone of uh every tokenomics uh then you should have strong incentives for your community for uh other stakeholders for investors and Etc to hold that tokens um so yeah uh then uh you should of course have integration with the platform uh we should not go into the meme coins uh but basically this is also a good example of uh toomics uh one more ID is scalability a lot of projects I don't know why they think about that well okay we can develop the project and maybe uh our capitalization will go let's say uh 20 mil or something but if the price of the token and the capitalization will grow higher uh they just don't understand what will help happen in that case I will show the example of uh the issue with the scalability in a moment now and of course uh compliance so this is an example of the case when you just don't think about the scalability of the project the idea here was that uh while you uh you you can buy uh access to the platform uh by paying in tokens so there was a fixed amount of tokens from 1 to 75 well that makes sense when uh the price is um less than a dollar well yeah you can spend let's say $1 to enter the platform in this case it works but if the price of the token like goes uh up to $200 you have to spend up to 15,000 just to get access uh to the chat it's it's crazy and uh this is uh these are the um end scenarios of uh the toomics that you should also uh consider what will happen if everything goes very very well and what happens if everything goes very very bad um and of course you can uh to understand the sustainability uh stuff you can draw some kind of a sustainability Loop to understand how everything that happens in your project uh provides and adds value to the growth of the whole ecosystem uh what about the developers about uh the community about the project about everything so uh you should understand how it works and uh when you do this type of sustainability Loop uh you you can see where there are uh issues uh with this sustainability maybe you can see what happens uh if everything goes uh wrong and uh you and there is a death Loop uh and let's speak more about sustainability of course this is very important for sustainability um I mean uh yeah this is another example uh so if uh we speak about syst uh from the first point of view uh it could be a very it could be a very sustainable project uh but uh when you dive deeper you can uh slightly understand that there could be some issues in this or that uh scenario and in this case you can just try to understand what will happen with your project um if everything goes uh wrong and you can manage this risk you can uh there are cases uh when you try you you understand this risk risk and you transfer this this risk to another uh counter party and to another St stakeholder and you incentivize them to uh take this that risk so this is also one of the ideas so uh just think about uh the risks uh and what may happen in uh bad scenarios uh well to sum up um just it was uh wonderful 20 minutes uh to sum up uh the the main idea is of Economics it's it's very important to to for investors uh because they want to have um your to have your project uh to see in the success uh and in the lad of the coin Geo in top trending in Top by capitalization or Etc uh as for uh the investors they want to see it sustainable uh they want to see uh the clear uh utility vision and they want to understand how it works and just don't hide hide anything so think about best practice I es uh allocations vesting utility and sustainability and basically that's it uh you can follow us uh on telegram uh we will post uh some more additional information about uh This research um soon I believe and also uh you can message me or message us uh on our email and we can speak about toomics we can provide benchmarks or whatever so uh thank you so much if you have any questions I would love to if if I have still some time yes we still have time for questions so this is going to be a long Q&A session I see hi thanks for the talk um how do you prevent the the dead spiral of of a token when in the absence of any other signals about the company um the market starts treating the token as as a signaling mechanism so for example when you have a good project but the price of token starts falling and everybody loses confidence and you know you demoralize your Workforce and your your community and everybody else how do you prevent that uh so basically you should uh develop your tokenomics to prevent this stuff and uh if you have already the project and the tokenomics and the token in the market um maybe it is too late uh but uh if you have this issue at the moment I think that you should uh try to um think of the reasons uh what is the reason of why uh the price is going down so is it about uh the community is not satisfied with something let's say uh we've discussed one of the cases when the community was not satisfied uh and they uh just withdrawn a lot of liquidity from your project uh and that's why it uh had it was in a very bad shape or so you can somehow analyze uh that issues and try to solve them uh so this is one of the things uh also uh you can try to uh when you develop the toomics uh you can try to uh as I said try to understand the risks uh in uh this uh sustainability Loop in this Loop of your value uh and understand what are the risks uh then you can uh let's say um exclude the utility of the token where uh this risk appears or you can if you want to keep this uh utility in your token you can try to uh manage this risk and to hedge it to another uh counterparty to another stakeholder to maybe issue one more token so they will hold that risk uh or you can uh try to develop a um sustainability mechanism price uh price stability mechanism of the token so it usually slowers the growth of the project and the growth of the price but if everything goes wrong uh it supports the price thank you thank you for the question had one more yeah hi uh what is your approach to model economics for price project which tools you use is it Excel or something something special uh thank you so basically we use Excel uh we do the Monte Carlo analysis it's when you try to do a lot of different uh random scenarios and uh random approaches uh you have range of uh different outcomes and this is the thing this this is one of the things that uh we model the other thing is that we uh do these different scenarios what happens in this case what happens in that case and we try to understand what uh could be the consequences of uh good scenarios or bad scenarios so uh if everything goes really really well and uh the price of the token will be uh 200 as in the example in the case uh what will happen with your business uh will you have uh the access to your platform uh that will be 20,000 uh or something uh for instance when the sneakers were $500 uh this this was a very big entry barrier for newcomers so uh we try to manage these scenarios uh and basically yeah we work with Excel a lot thank you question uh I have a question about managing risks related to uh decentralizing and burning the lp tokens let's say if you want your project to be sustainable to be Des centralized if you want investors to have more confidence you deploy your token to an exchange and you burn LP tokens uh are there any mechanisms uh to manage risks that are associated with this let's say if you uh deploy liquidity and then you burn LP tokens then there is a risk that this underlining protocol something might might happen to it right like uh the team will stop developing it it will be abandoned and so on so in this case if you burn LP tokens the uh the tokens in the pool will basically be like lost if you don't have any risk management tools right so how to address this risks uh here uh so I think that uh we can remember the um very old recommendation of Finance to diversify your risks uh not to um provide all the liquidity to only one platform for instance this is one of the things but in this case you will have to manage uh that on different platforms they could be different price so this is the other thing that you should manage uh basically uh actually it's really good question uh and you really should uh diversify and try to locate uh your liquidity into different projects into different um uh pools into different uh dexes uh and in this case um if one of them will go and sync will go down and think in this case you will have at least let's say 90% of uh your liquidity initial liquidity uh sorry and this can burn the supply as well so it can also be some sort of a positive thing right if you diversify and then one of the protocols so let's say goes like stops developing and so on so if they stop to develop the project it means that uh probably there will be uh no more new features in this uh project in this protocol and probably there will be uh no uh attraction of new users so but liquidity will stay there forever and uh if uh well actually you can really forget about that liquidity but uh if you have your tokens there you should uh manage uh that you you will have different prices because there will be an Arbitrage opportunity for uh the just players in the market so this this is not they just of course if they uh just stop to exist that would be a very good uh thing for your project but usually that doesn't happen they just stop to develop this project and uh that's it and but liquidity stays there forever thank you we have time for one more question do we have one more question and it's a WAP thank you so much give it up for Constantin