Mike Silagadze - Consumer Apps in Crypto - TOKEN2049 Singapore 2024

hello uh so my name is Mike sagad I'm the founder and CEO of ethery uh I'm going to talk to you today about some lessons that could be taken from the web 2 world uh which is where most of my my background is is from actually uh and apply it to web 3 to build uh successful uh apps specifically consumer apps um before I get into it uh let's do a quick show of hands how many people have heard of ethery okay all right looks like about 20% that's not bad how many of you have actually used it uh in uh you know in your crypto Adventures okay all right so a handful of people uh well that's great so uh so I'll spend a little bit of time uh towards the the end of the talk U telling you a bit more about ethery but at a high level what ethery does is our mission is to make defi easy and accessible to normal people uh our mission through a suite of three integrated products ethery stake ethery liquid and ethery cash uh is to make it so that users don't have to deal with all the typical complexities that they uh normally would deal with in in dealing with dii okay so I'll start with a bit of a a background uh as far as like where I come from in the the web 2 world uh I started uh pretty much out of University company called top hat which was an education technology uh business um and uh if you know anything about uh the education technology space in our case we we sold software to universities uh to make learning more engaging for for higher education if you know anything about that space you know that's basically where uh uh startups go to die uh it's one of the most brutally difficult uh spaces that you can get into for all the reasons that you could probably imagine super slow misaligned incentives Etc uh so it's an incredibly challenging space to build uh you know any kind of products let alone you know products are aimed at the the end user thankfully topad ended up being pretty uh pretty successful uh but it took a long time we you know I spent about uh 10 years from start to when we uh when we exited the business uh you know building it you know really against the grain of uh you know what was what was possible and and read by the end of it uh uh the business was great we we had about 60 million in uh annual revenues um we were growing about 40% a year uh break even so it was it was a fantastic business over 400 employees and then in 2021 we we ended up selling the uh the business and it was a you know it was a great outcome now one of the reasons that I think Top Hat was successful is it was in this uh uh type of category that's known as vertical vertical SAS uh some of you hopefully know what what that is actually show of hands how many people know the category vertical SAS and know what I'm talking about when I say that uh almost nobody okay well good uh so I'll do a bit of a tutorial about what what that is and why that's interesting and I think Super relevant to the uh uh the defi space um uh so yeah so top how was a vertical sass business which basically means uh it was a business aimed at a particular industry segment so in our case it was higher education uh and it focused on building a suite of products like layers on a cake uh targeted at that one uh one segment of users and vertical SAS businesses became uh incredibly popular around the 2010s or so um and uh it started becoming a bit of a a model and a template kind of developed for how to build these businesses and why they were really interesting and and super effective uh they uh they tended to be really Capital efficient they tend to grow really fast uh and we're just these wildly profitable uh uh types of uh companies in fact if you look at vertico SAS companies on the uh the NASDAQ or or S&P 500 list uh you would you know that index of companies would have outperformed pretty much anything uh over you know the the last little while I haven't checked lately but I think that's probably still uh still true uh so these are these really awesome businesses okay so what makes them awesome well vertical s businesses or vertically integrated businesses tend to have a really uh powerful positive feedback loop because when you offer multiple products to the same set of customers uh among other things what tends to happen is you tend to have very low uh cost of acquisition you tend to have very low CAC for your users because with every product that you launch you can cross sell and upsell that same product to the same user base which is substantially cheaper than acquiring a brand new customer in some some other uh industry so your sales and marketing costs tend to be a lot lower uh as a result of that now another benefit of is now you've got users that are using multiple products rather than just one product and so your arpo your your average revenue per user is also higher so you can provide you can afford to provide a better level of support you you know you can charge more because not only is there uh you know more products that you can sell to the user but there's a value that you can uh benefit from in terms of the integration of the of the products themselves because it just creates a better experience for users that in turn leads to lower churn which you know if you hopefully in your mind you're thinking about these uh these things as applied to defi projects or the Crypt space you tend to have lower churn because if users are using multiple products uh in your Suite of offerings instead of just one what that leads to is they're very likely to stick around you know even if one product doesn't fully meet expectations what tends to happen is you know well they're using a whole bunch of them and so they kind of stay in your uh in your ecosystem and and universe so uh and then of course you get better Network effects because all of your energy is directed at like a single industry a single uh base of customers uh and users uh rather than being spread across a whole bunch of different uh you know different categories so so these businesses tend to be really awesome again super profitable very Capital efficient uh you know long lasting you tend to in fact have negative gross dollar churn again if you're you know in the SAS world you know churn is a huge challenge just like it you know it is in defi because you have to you know if you lose 10% of your customers every year you have to throw sales in marketing dollars add it to just get back to even and and then you know uh hopefully more in order to to continue growing so anyway so these are great businesses they're really awesome now none of that exists in defi we see a bunch of this in CI like centralized exchanges in particular are great at this right uh they have dozens of products in most cases you know for the you know retail user for institutional and uh you know everything in between uh and they do this really well but in defi what we see instead is thousands and thousands of these Point Solutions you know dex's per exchanges yield aggregators Farms whatever all these different things and you know of course 15 different versions of each one of them that basically do the same thing and what it what it requires the user to do is to then basically almost wire up their own Financial derivatives in order to participate in defi which is kind of absurd really uh and if you think about what percentage of users in the broader population uh would be capable or interested in doing this kind of stuff it's quite small and so it's no surprise that in Defi and this is you know the the sort of dirty secret that anybody that operates a protocol knows is there's maybe a few hundred thousand users like real users I'm not talking about active wallets or any other you know nonsense metrics but there's maybe a few hundred thousand actual dii users out there and out of those few 100,000 users there's maybe 5,000 that actually have basically all of the assets uh I certainly didn't get into the crypto space to serve 5,000 super rid dudes um so I this is a problem that I think needs to you know needs to be solved so um you know I I think it's important to talk a little bit about why this is why is it the defi is filled with you know thousands of these Point solutions that aren't super integrated and don't create a you know particularly good uh user experience I think a lot of it has to do with the fact that defi is still uh relatively early stage you know if you think about the you know the clock started in 2020 uh you know understanding that maybe it was a little a little bit before that uh that's not super long right um uh the the space hasn't had enough time to mature and develop a lot of the tooling to make it uh more uh more user friendly for uh uh for for customers uh so that's one part of it you know if you look at where defi is relative to let's say under Industries uh you know I might look at the early days of personal Computing right in let's say the 1990s when you know if you really wanted to to have a computer you you pretty much had to build it yourself you know you'd have to buy a case a motherboard a CPU you know you'd have to uh buy a video card you know wire it together you'd install your uh uh your operating system from floppy discs I'm definitely aging myself here hopefully some of you did this too um uh you know it was it was an experience that was really only meant for power users normal people would never do this kind of stuff and it was only when a lot of that stuff got abstracted and ified that computers started to become more of a mass Market thing and you know everybody got one in their pocket and on their desk and uh and so on so I think part of it is just uh the fact that the space is early another challenge and again I feel like I have to talk about this is that a lot of the crypto funding environment is pretty um uh toxic right there's predatory behavior among crypto investors that in the SAS world and really the you know any other part of the world um would get you blacklisted basically instantly but we as a crypto Community kind of tend to look at it and say well that's just you know normal behavior uh so I think that's something that also has to change because it leads to very shortsighted uh Behavior it leads to you know your product uh for for many crypto companies their product is really their token that they're trying to launch the narrative around it uh ends up being almost like a secondary afterthought so that kind of stuff really needs to stop being tolerated if we were to move uh uh the space forward and actually make it something that's you know that's more broadly applicable okay so what ethery is doing I mean our whole trick and the reason we've you know we've had some success uh uh you know over the last uh couple of years is we are basically applying that same vertical SAS playbook in the case in this case you know vertical integration in the crypto space um to defi we are creating a suite of integrated products that make defi easy and accessible to normal people so specifically in our case that means ether fry steak ethery liquid and ether fry cash that uh together you know put bubble wrap around Defi and Abstract a lot of the complexity uh and we plan to do a lot more of it to to make it even easier so that we can actually onboard the next 100 million the next billion people into uh into crypto what we're trying to do overall is to create this MVP of a financial services Solution that's Crypton native for users that allows people to to solve the three basic problems that they have uh in you know in their financial lives they want to be able to save their money they want to be able to deploy their Capital to invest it and they want to be able to spend their money so we need to create a suite of these integrated products that make it easy for them to do that and as I said in our case that's stake liquid and cash so ether price stake is our liquid staking and reaking product analogously could be thought of as a savings account uh it you know it's been around for a little over a year now it's grown to about uh I think almost six billion in in assets so it's you know one of the largest products in uh uh in defi now it's been incredibly successful um and our next product was ethery liquid uh which we launched on on the back of uh ethery uh stake and that's a defi strategy product so it is basically an answer to the question great you've you've staked your eth now what do you do with it uh and so it automates and simplifies the process of deploying your staked assets into uh into defi so that you don't have to you know wire up your own Financial derivatives you can uh automate that uh and have that uh simplified so now this product is over a billion in uh uh in TVO it's by far the largest in the the yield aggregator category as as it's called Uh and it is a great example where you know we had this thesis that we could apply vertical integration in the defi space and we'd be able to launch another product and get our existing user base to adopt it and it it worked out uh uh super well and our last product is ethery cach which is a non-custodial wallet with cross chain built right into it um account abstraction uh social recovery and all these great features uh that make it super easy and uh and simple to use um and attached to it is a credit card so allows you to take your your assets uh either spend your stables in the real world using a Visa credit card or to borrow against your defi positions again and use those use those assets in in real life U it's something that we're super excited about we are just in the process of rolling that out to the first uh uh few hundred uh beta users uh but I'm I optimistically I expect this to be the largest crypto payments product uh uh within a few months as we saw with our you know with our other offerings so uh so we're we're pretty excited I think hopefully this becomes a bit of a model that allows the space to uh uh to mature and um create an environment where normal people can easily plug into dii uh and uh just live their lives on chain uh such that they never have to offramp again thank you