Web3 Valuations, Tokenomics & Startup Strategies with Neil Thakur

[00:00:00] Charlie: Okay. Welcome to this episode of the what the [00:00:05] three podcast, the podcast, where we tell you emerging technology founders, how [00:00:10] to build your businesses from zero to one. Today, we’re walking through the [00:00:15] intricacies of valuing your company and products and maximizing your startup’s valuation. [00:00:20] Teknos is Neil Thakur.

[00:00:23] Charlie: So a little brief [00:00:25] bio about Neil. So co-founder and managing director of Teknos [00:00:30] Associates and head of their cryptocurrency and blockchain practice, practice as a [00:00:35] Yale alumnus with a certified valuation analyst designation. Neil is a [00:00:40] pioneer in the valuation of digital assets and has spearheaded numerous high stakes valuations [00:00:45] across tech.

[00:00:46] Charlie: And life sciences sectors. He’s a recognized industry leader, having been [00:00:50] named a 40 under 40 on an honoree by the NAC VA. [00:00:55] Neil, thank you for being here with us today. Much appreciated. [00:01:00] 

[00:01:00] Neil: Thanks for having me. And thanks for the kind words, much appreciated. 

[00:01:03] Thomas: More [00:01:05] than welcome. So, so Neil, Neil, [00:01:10] like, you know, it’s.

[00:01:12] Thomas: It’s a super interesting, [00:01:15] piece of industry that you’re sitting in. I think from the traditional perspective, it’s very important [00:01:20] for all of our three perspectives, I think often overlooked, but how, how did you get [00:01:25] started? How did you, you know, come to this point where you said, like, what’s the needs this, like, [00:01:30] How did you set up this whole division at Teknos?

[00:01:33] Neil: It’s a, it’s a great question. [00:01:35] And like many things in, in call it emerging tech, it, it’s almost [00:01:40] by accident. You know, we, as a firm, we’ve been around for a while, for about 15 [00:01:45] years. And a little around, maybe around 10 years ago, actually, even before [00:01:50] that, I actually got a call from a very well known, VC that’s well [00:01:55] known in the space now, but at the time, was just kind of [00:02:00] starting out in the space.

[00:02:01] Neil: They had about, you know, 10 to 13 kind of investments and [00:02:05] they reached out to us because we do a lot of valuation portfolio work. And [00:02:10] so they said, Hey, listen, we’ve got these, we wouldn’t call startups at the [00:02:15] time, but call it, you know, blockchain related. Types of companies and [00:02:20] we need help valuing them.

[00:02:21] Neil: And, you know, we had a quick conversation about it and [00:02:25] we, I was very intrigued by it. We didn’t end up moving forward with them at that [00:02:30] time. But then fast forward, maybe a couple of years later, when we really got into the space, we [00:02:35] got a call from some folks over at, at ripple actually. And, [00:02:40] um. It was weird because they said that, well, we’ve got this, this XRP, [00:02:45] it’s locked up with a market maker.

[00:02:46] Neil: We’re trying to figure out how to price it. You know, [00:02:50] do you guys have any interest in trying to take a stab at it? And we literally said, okay, [00:02:55] yeah, we’ll give it a shot. And we, we came out with kind of weird lockup mechanism, [00:03:00] valuation, you know, concept and, and literally from [00:03:05] that kind of exposure, we started getting calls from.

[00:03:08] Neil: Other guys in the space [00:03:10] that heard about us doing this. And, you know, the use case was a little bit different. [00:03:15] You know, they were starting a new project. There was a token [00:03:20] component to it. They need to understand how to value that for different purposes. A lot of times it was either maybe [00:03:25] compensation or it was part of a transaction and they said, Hey, you know, can you help us out with that?

[00:03:30] Neil: [00:03:30] And there are some very well known projects in this space now. And, [00:03:35] but at the time they were kind of. Four or five guys in a room. And, [00:03:40] you know, that’s kind of where it took off. And there’s a whole kind of cycle of, you [00:03:45] know, should we be doing this like full time or, you know, where’s this going to go?

[00:03:49] Neil: And we went [00:03:50] through that, kind of educational process internally where it was, all right, you know, [00:03:55] we’ve got this, like this mass supply of, you know, companies that have come in, needed this. And then, you know, [00:04:00] like market tanked, then it kind of went away and then it came back. Okay. [00:04:05] Multiple times. I feel like we’ve seen cycles in this industry that we see in traditional equities, you [00:04:10] know, in the last 10 years that we see in traditional equities that we see in 50 years, right?

[00:04:14] Neil: A hundred [00:04:15] years rest. So anyway, that’s, that’s a little bit of how we got into the space. And [00:04:20] then I would say maybe about probably about five years ago, we said, you know, let’s, you know, devote [00:04:25] an entire group to this. And I spent, my time kind of going back and forth between [00:04:30] industries. But, at this point we said, Hey, let’s, we’re all in and, you know, [00:04:35] let’s devote all of our, at least my time and a few folks in our group.

[00:04:39] Neil: We’re going to do [00:04:40] this long term and, and then here we are. So yeah, it’s kind of a wild [00:04:45] ride, you know, it’s just a random call here and there, you know, got us into it, but [00:04:50] anyway, that’s a little bit about that. 

[00:04:53] Thomas: And, and the interesting thing I think about this [00:04:55] is like, you know, if you look at Ripple, you hear all the stories about Ripple, right?

[00:04:58] Thomas: Like, I think there’s [00:05:00] a lot of things known about Ripple and, and, but I think these kinds of things, they’re being often [00:05:05] overlooked because they’re not sexy, right? They’re just like part of the, I think the boring piece of, of what, what [00:05:10] blockchain is. So it, it doesn’t often also, I don’t, don’t think get the spotlight on it.

[00:05:14] Thomas: So [00:05:15] hearing this super, super interesting that, you know, you were the guys that, you know, Actually help them [00:05:20] take the next level step, right? 

[00:05:23] Neil: Yeah, for sure. Yeah, [00:05:25] that’s exactly right. It was kind of, you know, that, that relationship in of itself, you [00:05:30] know, validated a lot of what we do when, you know, again, you know, a lot of people were just afraid to touch this stuff, [00:05:35] right?

[00:05:35] Neil: It was, you know, this was stuff they hear about Bitcoin at the time. And this is [00:05:40] mostly kind of utilized in nefarious ways. And so, you know, here we are. [00:05:45] Yeah, for sure. Yeah. 

[00:05:49] Charlie: So what was [00:05:50] the price of that pizza? Like now 10 million bucks or something crazy. 

[00:05:54] Neil: We’ve had [00:05:55] that discussion several times. 

[00:05:58] Thomas: Yeah.

[00:05:59] Thomas: And this, that’s [00:06:00] the interesting thing. And I think partially as well with that, these, these cycles where you see the business [00:06:05] come and go, you’re like, should we really do this? Should we? And then there is that point, I think, where you’re just like, okay, [00:06:10] now, now it, it becomes, you Now we have an actual shot at the actual opportunity.

[00:06:14] Thomas: [00:06:15] We can do it right because we’ve done so many of these cycles already. And here you are, [00:06:20] absolutely amazing. It’s, it’s not often that we [00:06:25] hear or that we talk to people that sit like, you know, behind the curtains and, you know, orchestrate these kinds [00:06:30] of pieces. So that’s, once again, like super, super cool to hear that.

[00:06:34] Thomas: [00:06:35] And then what pops up in my head is like, What are the challenges? Because like, you know, so [00:06:40] you went back and forth between traditional and web 3, but you know, I just said you took a first stab at [00:06:45] it, like, how different was it? Like, maybe, you know, I don’t think [00:06:50] we can talk specifically about Ripple, but how different, are the frameworks or [00:06:55] were the frameworks back then and now between, you know, traditional and web 3?

[00:06:59] Thomas: Was there a lot [00:07:00] of challenging moments where you’re like, okay, we don’t know how to solve this or we’re just [00:07:05] going to go with this? 

[00:07:06] Neil: Yeah. Excellent question. And, yeah, a lot of different [00:07:10] components to that. Yeah, there’s the valuing of the company and then there’s the [00:07:15] valuing of potentially a business.

[00:07:18] Neil: an asset like a token [00:07:20] that is different, right? And, you know, they, they can work together, right? [00:07:25] At some level. But at different stages, they have kind of different values [00:07:30] and different interpretations of value. And so, you know, when we look at a web three [00:07:35] company that maybe has a token project, And it actually just [00:07:40] kind of depends on the stages over the last kind of 10 years, right?

[00:07:43] Neil: There were very different things in the [00:07:45] early days where I was just, it’s very similar to like when companies were going [00:07:50] public in the early 2000s, right? Everyone was, it was just like, you know, we had a. com [00:07:55] address and we’re just gonna go public. And it happened, you know, a couple of months. And then there’s like a [00:08:00] graveyard of like all these companies that occurred afterwards.

[00:08:03] Neil: And I think there was a lot of [00:08:05] kind of, Thought that this was, that’s what this was again. But [00:08:10] obviously, you know, things are different, with what you’re talking about, this specific asset class, which is what [00:08:15] has been created, right? We haven’t seen, we hadn’t seen a new asset class [00:08:20] like this kind of exist in a long time.

[00:08:22] Neil: And so, you know, You know, one of the big [00:08:25] challenges was trying to understand, you know, how to value the company and then how does that token fit into [00:08:30] it? And a lot of times it kind of started with the token of itself. So a lot of people, when they came to us, it was, [00:08:35] you know, try to understand the valuation related to the token and what we would have to do.

[00:08:39] Neil: And what [00:08:40] we still try to do is, you know, try to utilize the [00:08:45] existing kind of frameworks, but just modify them a bit. So there’s, you know, [00:08:50] the concept of. Really at the, at the end of the kind of market participants, right? [00:08:55] Which we try to start out with everything and then you work your way down the channel, [00:09:00] right?

[00:09:00] Neil: Is there a way to develop some sort of income model? Candidly, [00:09:05] they’re using like what we call kind of discounted cash flow approach. Doesn’t [00:09:10] really apply to a lot of this stuff. It’s really hard to kind of figure out. Forecast, you know, [00:09:15] utilization and adoption and growth in these unique kind of systems because every one of them is [00:09:20] like its own kind of, system in of in itself.

[00:09:23] Neil: Right? And so you’ve never seen [00:09:25] kind of that call it type of, I’ll use the word currency, but it’s not always applicable, [00:09:30] but, we’ve never seen that exist and you don’t know how it’s going to, [00:09:35] You know, be adopted across time. Right. And so, you know, we [00:09:40] had to think about it, in terms of, you know, what are the right kind of methodologies to [00:09:45] put here and have there been transactions in the space?

[00:09:47] Neil: Can we look at those to kind of, you know, get [00:09:50] to a value for the token in and of itself. And then, you know, same thing on the equity side, right? A lot of [00:09:55] times you could argue that, you know, there are these, you know, capital raises, [00:10:00] for the company. Right on the equity side, and you can look at that as kind of [00:10:05] a primer for the value.

[00:10:06] Neil: And maybe the token in of itself is kind of priced in there. So we had [00:10:10] to think about, you know, the relationship between the two, and try to figure [00:10:15] out kind of the best ways to apply it. But it’s very different than saying, Hey, I’m just going to look at, you know, [00:10:20] comps from, you know, Facebook, right? And, you know, companies like [00:10:25] that who are already out there and we can draw, you know, priced earnings, [00:10:30] multiples, stuff like that, like doesn’t apply here, right?

[00:10:33] Neil: In the same kind [00:10:35] of, methodology kind of concepts, right? So you have to kind of break that apart a little bit. [00:10:40] And then figure out how the, how the two kind of work together. But yeah, and you know, I could [00:10:45] bore you guys all day long, the intricacies of that, but you know, we can save that [00:10:50] for another time, but yeah, at the high level, yeah, trying to understand how to apply [00:10:55] kind of existing methodologies, in this new context was the biggest challenge and [00:11:00] continues to be right.

[00:11:01] Neil: As, as these networks kind of evolve. 

[00:11:03] Charlie: Yeah, I mean the, [00:11:05] the variability, the way in which tokens work and how, you know, we, I was [00:11:10] talking to Liam on the after dark yesterday about like, what are the most interesting token [00:11:15] launches and, you know, the way people are launching with like auction methodologies [00:11:20] or just state at the level of staking that, I mean the defi stuff that’s going on right now.[00:11:25] 

[00:11:25] Charlie: Yeah. The 

[00:11:25] Neil: retaking, all of that stuff. Yeah. Retaking stuff. 

[00:11:28] Charlie: You got your job cut out for [00:11:30] you with just catching up with what these guys are doing. If, if not being ahead of it. I, [00:11:35] but I mean, enough, enough about the, the too much professional stuff. I, I want to [00:11:40] hear about yourself, Neil. Like, how did you, how did you get into this?

[00:11:44] Charlie: How do you get into [00:11:45] valuation? Like, I’m, I’m, I’m the, the marketing business guy. I wanna know about the people. I like people’s [00:11:50] stories. . Yeah. How was, you know, how did, Neil graduated in uni go, you know [00:11:55] what? I’m gonna, I’m gonna learn what companies are worth , 

[00:11:59] Neil: you know? Um. [00:12:00] The background is, is boring in a sense that, you know, once I left college, I kind of [00:12:05] joined the crew of folks who.

[00:12:07] Neil: You either go into management consulting [00:12:10] or investment banking, right? And I took the investment banking path. 

[00:12:13] All: Hey, 

[00:12:14] Neil: [00:12:15] look, you know, I’ve nothing wrong with that. I’m just saying that like when we were [00:12:20] graduating, and now I’m dating myself. 

[00:12:22] All: [00:12:25] It 

[00:12:25] Neil: was, you know, unless you were at like Stanford or something like that, where it’s [00:12:30] really kind of focused on, you know, The startup community, yeah, [00:12:35] New York and, you know, it was kind of where you had to be for most of this stuff for a lot of the [00:12:40] folks that I went to school with.

[00:12:41] Neil: And so, you know, that was kind of, I started off in the investment [00:12:45] banking world. And then from there, like I always had an interest in finance. [00:12:50] Right. And so that was just naturally what kind of drew me through like a lot of this stuff. [00:12:55] And then I moved back to the West coast. I’m Los Angeles. So [00:13:00] I moved back to the west coast, actually got a job in [00:13:05] valuation for a specific type of evaluation.

[00:13:08] Neil: It was actually something focused more on [00:13:10] litigation for early stage, small [00:13:15] businesses, that kind of thing. And then from there I got back into banking briefly. So [00:13:20] this is this is actually, Oh, it’s, it’s a tale of the, [00:13:25] the. com, world. But, 

[00:13:27] Charlie: Give us the juicy 

[00:13:28] All: [00:13:30] detail. Yeah. 

[00:13:34] Thomas: It’s not that boring, [00:13:35] Neil.

[00:13:35] Thomas: It’s absolutely not that boring. Not boring at all. 

[00:13:39] Neil: [00:13:40] It was, it’s just hysterical when I think about it at the time, but we’re frightening. [00:13:45] Why? The, the world of, investment banking is, frightening [00:13:50] for folks, you know, especially at early stages of career, actually all parts of your career, [00:13:55] I jumped [00:14:00] into, back into the investment banking world, actually with a company [00:14:05] called ABN Amaro, that’s Dutch bank, pretty well out there, I think, especially for you [00:14:10] guys, they have a fit, they had a very strong, commercial [00:14:15] banking, side out here in the U S for a lot of tech.

[00:14:19] Neil: [00:14:20] Related to companies and they were trying to leverage that concept into the investment making world. And the [00:14:25] investment making world is very, very different than commercial making. Obviously the economics are [00:14:30] different. It’s a, it’s a very different type of, I think skill set from, [00:14:35] you know, the bankers that are involved in that.

[00:14:37] Neil: And, and so they were trying to get [00:14:40] into there and trying to leverage their context on the commercial side. And so this is right around, you [00:14:45] know, God, 2000 end of 2000, into [00:14:50] 2001. So, you know, if you think about what’s going on around that time, [00:14:55] everything from politically to kind of the, the startup craze kind of winding [00:15:00] down, You know that we were, you know, spending time kind of trying to change deals and [00:15:05] everything.

[00:15:05] Neil: And then, you know, we move forward into just like the dot com kind of [00:15:10] bust. And then, and then, then we had September 11th, [00:15:15] obviously that affects a lot of things. 

[00:15:17] All: And then 

[00:15:18] Neil: just, you get into [00:15:20] October and November of 2001, all of a sudden, I start hearing stories from my [00:15:25] friends, like on the street, who were like, Again, dating [00:15:30] myself, companies like Merrill and, Goldman and some of the other, you [00:15:35] know, well known investment banks.

[00:15:38] Neil: I, yeah, I mean, you know, who knew? [00:15:40] So they’re like, ah, man, I just got, I just got canned and I [00:15:45] was like, what? And they’re like, yeah, they let our group go. And like, yeah, a lot of analysts and associates, [00:15:50] and then, you know, we’re like, oh, we’re fine. It’s a [00:15:55] European bank. There’s, you know. They have a long term interest in sticking this out.

[00:15:59] Neil: [00:16:00] And then we started to hear a little bit of whispers about things. And then we all got [00:16:05] called into a conference room one day and this is everyone’s 

[00:16:08] Charlie: consultants. And 

[00:16:09] Neil: yeah, oh [00:16:10] yeah, it was like, you’re like, Hmm. So every, there’s about 25 [00:16:15] of us, there’s the MDs down to the analysts and they’re all in there and some guy comes in [00:16:20] from London and he hits the speakerphone and there’s this guy from, I think he’s [00:16:25] from, Call it in from Amsterdam and he’s like, Hey, listen, guys, it’s been a, it’s been [00:16:30] a good run, but you know, we hav we have some situations that we [00:16:35] have to deal with and the other group is going to be dissolved and you guys are all going to be like, so we [00:16:40] were let go via conference call the entire group, [00:16:45] all over, you know, like at one point, just one period of [00:16:50] time.

[00:16:50] Neil: And so, you know, that, that was, uh. That’s my, investment [00:16:55] banking kind of horror story of, you know, things can be great, but in tech specifically, [00:17:00] it was just, it was a bloodbath like for everything. And [00:17:05] so, you know, that, that was my, my kind of foray back into that world. [00:17:10] And then, you know, after that, I, I jumped back into evaluation for a bit and then [00:17:15] moved into, another actually European based company called Grosvenor that they do, [00:17:20] investment, in real estate.

[00:17:22] Neil: So, and amongst other things. And so I spent some time [00:17:25] there. And then after that, I jumped over to, well, [00:17:30] what is now, I think, a part of Duffin, Phillips and Kroll, company called page mill [00:17:35] partners. And, that’s a boutique investment bank. And, I spent some [00:17:40] time there and then while I was there, one of the.

[00:17:43] Neil: The partners over there said, Hey, listen, I [00:17:45] literally, I was there for about six months. And he said, we’re thinking about spending off and start our own thing [00:17:50] out here. What are we doing here? And he’s like, well, [00:17:55] let’s carve out, there’s a valuation kind of sector component, which, [00:18:00] you know, combined with some investment banking, Concepts that we’re going to [00:18:05] try to spit out and focus in on versus just running traditional deals.

[00:18:08] Neil: And that meant, [00:18:10] there’s a lot of tax financial reporting and then, valuations around fairness, [00:18:15] opinions, IP, all that, but really focused on the valuation side of things. [00:18:20] And, but it’s focused on emerging growth tech. And so we said, Hey, let’s all right, [00:18:25] I’m in. And so that was kind of the beginning of that.

[00:18:28] Neil: That was back in 2008. Okay. [00:18:30] And, you know, here we are, still doing it, for [00:18:35] folks, but yeah, that’s a little bit about my journey. You know, going through just like the [00:18:40] pitfalls of, you know, being young and, you know, just kind of going through that process, but, [00:18:45] certainly learned a lot through that.

[00:18:46] Neil: And it certainly helped me, try to better understand [00:18:50] a lot of the companies that we work with and, you know, that it’s cliche, but that [00:18:55] resilience and that hustle certainly matters. When you’re doing this, in the [00:19:00] context of, you know, starting a new company, right, because we’ve seen a lot of things [00:19:05] going back over the last 20 to 25 years and, you know, history does repeat itself in [00:19:10] different ways.

[00:19:10] Neil: It just kind of gets modified a bit, but, you know, we, we can still kind [00:19:15] of think about, you know, how this stuff applies, in the modern [00:19:20] day. So anyway, that. Hopefully that was somewhat interesting. [00:19:25] Well, 

[00:19:25] Charlie: actually it’s a journey, right? 

[00:19:28] Thomas: That’s one thing. And it also makes a lot [00:19:30] of sense because I wanted to ask you, I was like, you know, how do you, because what is your rabbit hole web three, [00:19:35] right?

[00:19:35] Thomas: Because everybody has their aha moment. I call it the rabbit hole. You’re like, Oh, [00:19:40] but you seem drawn to these kinds of things, right? Like if you look a little bit at [00:19:45] your career, the web three fits in there. Like almost, it’s like it was a missing piece. [00:19:50] 

[00:19:50] Neil: Yeah, the web three component, is [00:19:55] interesting because, you know, in the early part of just the [00:20:00] call, the kind of the blockchain phase of things, you know, it was, let’s just get a token [00:20:05] out.

[00:20:05] Neil: There wasn’t a lot of use case. It, you know, there, there are a handful of projects and we [00:20:10] were, we’ve been lucky enough, I think because we got in so early, because [00:20:15] we, we knew a lot of the, the players in the space, the people that we were working with. [00:20:20] I’ll understand the kind of the long view towards it.

[00:20:22] Neil: So, you know, we traditionally didn’t have a [00:20:25] lot of projects and still don’t that come to us and say, Hey, you know, we’re just getting some kind [00:20:30] of, you know, meme coin out there, where we’re doing a token sale. [00:20:35] And then once it goes, like, You know, it’s just gonna pump and dump, right? That kind of [00:20:40] stuff that we didn’t get exposed to a lot of that.

[00:20:43] Neil: In the early days, it was, [00:20:45] while that was the case for a lot of the tokens that were hitting the market, the projects that [00:20:50] came to us were trying to put together kind of really use cases around, you know, their [00:20:55] traditional web to ideas, but kind blockchain [00:21:00] technology. Right, which is very powerful. I think that really was the hook for me [00:21:05] around the concept of, you know, the blockchain in of [00:21:10] itself, right?

[00:21:10] Neil: And what it represents, the decentralization of things, [00:21:15] and how you’re moving from, you know, a controlled environment, like, you know, the traditional kind of [00:21:20] big companies out there that we all know of, to [00:21:25] kind of a different concept where, you know, Hey, listen, I am going to try to actually own and [00:21:30] monetize my own data in a certain way where like it’s, it’s managed [00:21:35] and I, I can, you know, monetize it in a certain way versus someone else.

[00:21:39] Neil: [00:21:40] Controlling that. And that concept in of itself, I think was incredibly powerful for me [00:21:45] to, to kind of get my head around. And, and so, you know, it’s still something that I find [00:21:50] myself, Explaining to folks, who are like, you know, my, my, a lot of my [00:21:55] counterparts are, you know, they’re in private equity and traditional finance, right?

[00:21:59] Neil: And they’re like, dude, what are you [00:22:00] doing? Like, , what, what is that? Right? ’cause we’re talking about it in our [00:22:05] context, right? And we’re, we’re such a small, like sliver still. Oh. [00:22:10] Of the capitalization of the entire, like, you know, world of [00:22:15] finance and just business in general, right? This is still very niche, [00:22:20] even though there’s a lot of drama around it publicly.

[00:22:24] Neil: You know, [00:22:25] but you know, it’s noisy, 

[00:22:27] Thomas: but it’s small. Yeah. 

[00:22:28] Neil: Yeah, yeah, exactly. That’s [00:22:30] exactly right. And so you’re trying to explain that type of concept of, you [00:22:35] know, no, this is not just some sort of scam. This is actually you. You don’t even know [00:22:40] it, but the underlying technology is actually running and financial institutions, right?

[00:22:44] Neil: Like [00:22:45] the concept of, Validation and verification on [00:22:50] decentralized network is so powerful, right? If I can validate certain things at, [00:22:55] you know, for everything from provenance to other types of transactions at this [00:23:00] level, and it is, understood invalidated to a certain way where it’s, Someone can [00:23:05] track it forever.

[00:23:06] Neil: You know, that’s, that’s fairly important. So, [00:23:10] yeah, that’s really, that was kind of my moment, a few years back where once, [00:23:15] you know, I got my head around what that concept really meant, where I said, Hey, listen, I think [00:23:20] this is something that we really should, focus in on. And so, you know, That’s how I [00:23:25] came to be here.

[00:23:26] Thomas: That’s, that’s, that’s a big dip. That’s a big decision to make. And, and I, when [00:23:30] you were saying this, like, I think all of us have, because I, I come from [00:23:35] traditional web to tech and Charlie comes also from, from traditional, web [00:23:40] to, BizOps. And then at some point you realize that you’re becoming the DJ in the [00:23:45] room, right?

[00:23:45] Thomas: I give all the web to people. They’re like, 

[00:23:46] Neil: what are you doing? 

[00:23:47] Thomas: Why, 

[00:23:48] Neil: why are you doing, 

[00:23:49] Thomas: [00:23:50] because it’s great. And it’s that, and that’s that rabbit hole moment, right? Like, where you’re like, Oh. This, this, this is [00:23:55] why it’s so great. And let me explain to you. And they’re like, Oh, you must be fond of parties. 

[00:23:58] Charlie: I [00:24:00] even had, I think this is like [00:24:05] before the last full run, I was talking to my cousin and, and she was like, so you [00:24:10] don’t earn a commission out of this.

[00:24:11] Charlie: I was like, no, [00:24:15] Mel, no, no, 

[00:24:18] Neil: no. 

[00:24:19] Charlie: I [00:24:20] some, you’ll make some money. I I don’t own the company. No, [00:24:25] 

[00:24:25] Neil: love 

[00:24:26] Charlie: it. People, people do still, even today think it’s a scam. [00:24:30] 

[00:24:30] Neil: Yeah, yeah. I look, we’ve had our moments, right? You [00:24:35] know, there’s, there’s, I’ll use that, you know, turn [00:24:40] lightly, but, you know, there are certain actors in this space, but you could also argue that, I mean, if I [00:24:45] compare that to what happens in traditional finance, I mean, give me a break.

[00:24:47] Neil: There’s, there’s, there’s a lot of things. You know, there’s [00:24:50] the reason why, there are regulatory [00:24:55] bodies that exist and follow that, and the amount of fraud that goes down, and that [00:25:00] industry, the traditional fight is significantly higher than this. But, I understand [00:25:05] the concern around, a new asset class like this, something that, [00:25:10] can grow fairly quickly, in, in the right construct.

[00:25:14] Neil: And so, [00:25:15] you know. Naturally, there are other bodies, of government, [00:25:20] here and around the world that are always trying to better understand and manage, potential [00:25:25] concerns around that. So, you know, I do understand that too. 

[00:25:29] Charlie: Fair, fair, fair. [00:25:30] All right. So I think at this point, we’re going to move on to the, the [00:25:35] advice of startup founders.

[00:25:36] Charlie: We’ve, we’ve got your 10 questions here. Kicking off [00:25:40] with evaluation fundamentals. This is community driven community has asked us, [00:25:45] what do I have to do to ensure that I get to a series a, [00:25:50] and if Teknos looks at us, they like us, I think I [00:25:55] draw that kind of comparison with, With Adam, our editor, sitting in the back here, [00:26:00] you don’t want to screw the guy that’s telling you that’s going to like make you look [00:26:05] good both financially and on the video stuff, right?

[00:26:08] Neil: For sure. 

[00:26:09] Charlie: Don’t do [00:26:10] it. That’s the last 

[00:26:10] Neil: person you need to upset. 

[00:26:14] Charlie: Neil’s got to have 

[00:26:14] Thomas: a [00:26:15] lot of new friends after this podcast.

[00:26:19] Charlie: [00:26:20] But yeah, no, so valuation fundamentals, what, when, when you’re looking at a company and, and [00:26:25] bear in mind, like as practical as we can, what are the primary factors that [00:26:30] influence the valuation of a tech startup? 

[00:26:32] Neil: Yeah, I mean, it’s a good question. What are 

[00:26:33] Charlie: the emerging tech and [00:26:35] web three sectors for us here?

[00:26:36] Neil: Yeah, I think this is kind of evolved over [00:26:40] time and it continues to evolve. But, I kind of made reference to it, [00:26:45] earlier on. But, the companies that we work with that we [00:26:50] find to be successful have a real use case, right? There’s a, there’s a, a [00:26:55] very specific, case for the market need [00:27:00] around what they’re building.

[00:27:01] Neil: Right. And now in the web three space, it’s a little bit [00:27:05] different because, you know, we don’t see traditional call it revenue models, but you still can. [00:27:10] Right. I mean, you look at a company like. You know, like a, an exchange or like [00:27:15] a, like a Uniswap or something like that, where there are traditional kind of revenue metrics there [00:27:20] at some level, but they also have a token component.

[00:27:22] Neil: Right. And so, you know, when [00:27:25] we talk to companies, you know, outside of someone just having, you know, a mean coin. [00:27:30] What we look at for the most part is first understanding that there’s [00:27:35] a real kind of market need for this. And there’s a really use case that you’re building [00:27:40] around, right? That’s one of the most important understandings that [00:27:45] we need to figure out, you know, when someone’s putting something together, because if the, if you’re just kind of [00:27:50] You know, out there trying to put something random and try to make money quick.

[00:27:54] Neil: You know, [00:27:55] there’s not like a long term use case to building a business. Right. And if you’re building a [00:28:00] business, you want that strong use case that has been [00:28:05] validated at some level through like your research into the market. Right. And so that means [00:28:10] From there, you know, diving into, you know, what’s the market size and growth potential for what [00:28:15] you’re putting together.

[00:28:15] Neil: And in many ways, in that sense, it’s very similar to any other kind of [00:28:20] emerging growth, kind of web two kind of concept. Right. But we’re kind of marrying that [00:28:25] with the concept of, you know, putting things in a decentralized kind of capacity. [00:28:30] Maybe you’ll have a token. You don’t have to have a token. That’s the other thing.

[00:28:32] Neil: If we’re talking about web three, you don’t [00:28:35] necessarily need a token. And there’s so few. You’re putting this together. You’re making sure [00:28:40] there’s a use case. For what you’re putting together and then you got to ask yourself. Do I [00:28:45] actually need a token? What is that incentivization structure something that’s necessary for [00:28:50] this or am I building something that’s more kind of you know Infrastructure based right now.

[00:28:54] Neil: I’m like [00:28:55] tools like picks and shovels and tools that kind of thing Um where you’re going to [00:29:00] support the existing ecosystems so, you know when I think of it like in terms of the [00:29:05] things that You know, I really care about it’s, it’s that kind of use [00:29:10] case. It’s understanding the potential market size and growth potential.

[00:29:14] Neil: [00:29:15] And you can, or now we’re at a point where, as opposed to call it 10 years [00:29:20] ago, where, you know, there weren’t other. Tokens out there. There weren’t other web three types of [00:29:25] companies that I could look to necessarily. I mean, I brought up ripple, but that’s just one kind of, you [00:29:30] know, call it success story, at that time.

[00:29:33] Neil: But, you know, if I looked [00:29:35] at, you know, the tokens that were trading out there and there are no public companies, right. It was before really a coin [00:29:40] base, right? So you just, you couldn’t get your arms around what that meant. So now [00:29:45] though, We have, you know, there’s a few public companies out there. There’s, there’s a ton of [00:29:50] token projects, right?

[00:29:51] Neil: That we can look to a success stories like, like a chain [00:29:55] link, right? Like a salon, like companies like that. Or we can look at and say, Hey, you [00:30:00] know, how does this fit into these types of ecosystems? [00:30:05] Market sizing compared to that, you know, how do we compare to that? So those are all things that we care [00:30:10] about.

[00:30:11] Neil: In addition to that, I would also say the team and [00:30:15] expertise, right? This again, similar to the web two space and just traditional [00:30:20] stuff, but in addition, right, it’s, it’s guys who, you want to surround [00:30:25] yourself with as many folks as possible. In the industry, right, as possible, who [00:30:30] have a knowledge base around this, right?

[00:30:32] Neil: And so it’s one thing to talk to people who [00:30:35] have started like an e commerce company, right? Or just, and there’s nothing wrong with [00:30:40] that. It’s just that if they haven’t been in the space. Yeah. And don’t [00:30:45] understand the particular mechanics that are involved around it. Then, yeah, I [00:30:50] think you’re going to struggle a bit, right?

[00:30:51] Neil: Because how do you marry kind of the product and the [00:30:55] technology all with all of this stuff at the same time, without not really doing your [00:31:00] diligence and talking to people who have experienced this firsthand, and I think, you [00:31:05] know, that, that part of it can’t go kind of overlooked in this [00:31:10] process. Right.

[00:31:10] Neil: Exposure to the right people so they can understand the product technology, how [00:31:15] traction adoption works. And then, you know, biggest part of this [00:31:20] is really in the web three, just the concept of like, and, and you guys talked about this, like [00:31:25] in some level, like the, the network effect of things, you know, just [00:31:30] in general, like.

[00:31:31] Neil: No more like industry. And [00:31:35] is it this more kind of prevalent than the web three was that concept of community [00:31:40] building, right? And building out a network is incredibly important [00:31:45] for what we put together here. And if I’m starting a company, so, you know, just kind of, [00:31:50] you know, rehashing some of this, you know, understanding market size, growth, [00:31:55] potential team and expertise.

[00:31:56] Neil: Product and technology, talking to the right people [00:32:00] to understand traction and adoption and the potential network effects. [00:32:05] Those are the things that I would really hone in on. And some of it is a little bit esoteric, but [00:32:10] it really comes down to, you know, Communicating and talking to you to the right [00:32:15] people in the space.

[00:32:15] Neil: And, you know, I think there’s a lot of transparency in this [00:32:20] industry more so than, than the typical kind of [00:32:25] VC startups kind of world where, you know, And that’s the other thing, like you’re going to raise [00:32:30] money and all of that, right? It’s, it’s always been kind of owned by certain [00:32:35] VCs and other folks in the space.

[00:32:37] Neil: And now, while you still have VCs very [00:32:40] much involved in it, the ability to get out there and actually talk to people [00:32:45] and get information. About how this works, I think it’s never been easier, right? [00:32:50] There’s no like, okay, I feel like I’m in the dark about something because you actually do have access [00:32:55] to it, right?

[00:32:55] Neil: It is. I mean, I can go to a bunch of user groups, discord channels, et [00:33:00] cetera, to start and It just the right information from [00:33:05] people and then you’ll be surprised how many people you might know who understand kind of [00:33:10] exactly the thing is that you’re trying to put together. So, those are a few of the [00:33:15] things that I think are really important when I’m, if I’m thinking about starting up a [00:33:20] potential love three venture, 

[00:33:21] Charlie: is there a particular methodology [00:33:25] around valuation?

[00:33:26] Charlie: Yeah, that you go for [00:33:30] specifically early stage startups and, and how might they practically align to [00:33:35] those to ensure that they’re, you know, when, when they hit their next round or their big seed or [00:33:40] more series a, especially in the web three levels of growth that they, you [00:33:45] know, they’ve done the right things.

[00:33:46] Neil: Yeah, it’s a great question. And some of it has [00:33:50] to do with, you know, the, the underlying, you know, concept that we, we talked [00:33:55] about before of, you know, understanding your use case, but, you know, for the most [00:34:00] part now versus where we were again, you know, 10 years ago, there are. [00:34:05] call it market comparables that you can always start with, right?

[00:34:09] Neil: [00:34:10] And work your way back, right? I’m not going to say I’m going to be worth, you know, the, the total [00:34:15] value locked of, you know, what I can layer is today, right? Right off [00:34:20] the bat. But I could say, okay, look. Here’s [00:34:25] Eigen layer and here’s a bunch of other comps that are in the space and I can work backwards right [00:34:30] in terms of, you know, that’s that’s could be the value of the [00:34:35] token project and there’s some sort of component that it’s built into.

[00:34:39] Neil: You [00:34:40] know, with the value of the total company is a lot of times at early stages that the value that [00:34:45] took for one doesn’t exist yet. So, you know, that sliver of the protocol is very [00:34:50] small compared to the overall value of the company, which usually comes into being [00:34:55] like, call it the IP, the network know how all of that kind of stuff is where the [00:35:00] value of the company is at a very early stages.

[00:35:02] Neil: And if I think about that and I look at kind of [00:35:05] where. Some of these companies were at early stages of their [00:35:10] financing. That’s a way to kind of look at what my company could be worth. [00:35:15] And then, you know, and you can look at what the token could be worth in the future, but you know, there’s a huge [00:35:20] discount.

[00:35:20] Neil: They get supplied, right? It’s just [00:35:25] naturally like what gets applied, but that’s kind of the inner relationship between the two. But for the most part, [00:35:30] it is, it is still very market driven, right? But again, I think [00:35:35] we all have more access to that type of information than we had before, because a [00:35:40] lot of these projects are very public.

[00:35:42] Neil: About, you know, some of their financing [00:35:45] rounds and, implied values of things. And so you can look at it from the market [00:35:50] perspective, if I’m looking at trying to raise and where, I am compared [00:35:55] to where, other projects were at this stage. And so, you know, those are some of the things that I [00:36:00] look at.

[00:36:00] Neil: And then in terms of. You know, the call it the qualitative factors, you know, we talked [00:36:05] about it before, but the strength of the team that you’re coming [00:36:10] to, to put together the product and the technology that you have, I [00:36:15] think, Understanding that if there is a particular use case and you’re building a product [00:36:20] around something, and the underlying technology understanding that [00:36:25] component of it.

[00:36:26] Neil: And when you’re doing evaluation certainly is a key factor that comes [00:36:30] into it. And so, you know, again, we look to the market, at some level, and then, [00:36:35] you know, there’s. There’s other ways to kind of price things at early stages in terms of understanding, you [00:36:40] know, what does it actually cost to put this together?

[00:36:42] Neil: Right. And you can work your way back there. [00:36:45] And that’s a very kind of basic way to look at it, but that’s like, you’re kind of, you [00:36:50] know, you’re low, kind of call it. Tax valuation, if you will, of how to [00:36:55] look at something, right? What’s the minimum cost it takes to put something like this together? And then you [00:37:00] marry that with some of the market factors out there.

[00:37:02] Neil: And then you can come to a [00:37:05] conclusion of where, you know, maybe a C type of round should make sense. For [00:37:10] you, right? And so that way you understand both sides of the equation when you’re negotiating with [00:37:15] potential venture investors, right? Because they’re going to say, what, what’s the use case? What are [00:37:20] the market dynamics to this?

[00:37:21] Neil: Why should this make sense? Well, you should have that compelling [00:37:25] story. Right. At the end of the day, that narrative actually has not changed and in any type of [00:37:30] kind of capital raising environment, you still have to have a very compelling story, [00:37:35] and illustrate that there’s, there’s proper growth here.

[00:37:38] Neil: So, you know, a couple of things that I [00:37:40] think, that that makes sense there from a methodology perspective, 

[00:37:43] Charlie: it occurred to me that we [00:37:45] didn’t, we didn’t ask you the straight question. Have you ever. Valued at 

[00:37:49] All: [00:37:50] MemeCoin. 

[00:37:54] Charlie: And that’s how [00:37:55] cute the dog is. I can, 

[00:37:57] Neil: I can safely say. [00:38:00] Now we’ve, we’ve valued close to like worked on over a thousand [00:38:05] projects and we’ve worked with individual tokens [00:38:10] and companies in the space probably about 400 [00:38:15] different ones and I don’t think any of them have actually been a traditional type of [00:38:20] meme coin at all.

[00:38:21] Neil: They are all They’re all like either some [00:38:25] sort of utility token or governance token, something like that, that are [00:38:30] supposed to have, you know, a real use case, majority of them [00:38:35] have, I think most of them are, are around or still are, and a [00:38:40] lot of them are really successful. You know, that have [00:38:45] existed in the market.

[00:38:45] Neil: Other folks have, you know, they’ve had to reinvent [00:38:50] themselves. Right. And we can get into this in a bit, but you know, there’s certainly use [00:38:55] cases where, you know, there’s trial and error involved, right. Something that [00:39:00] made sense at early stages. But now the token is launched. It [00:39:05] exists, but it doesn’t have the same adoption or they didn’t manage the tokenomics [00:39:10] properly.

[00:39:11] Neil: They’re trying to figure out. You know, with, you know, the right folks [00:39:15] of either market makers and liquidity providers, how to manage the token in of [00:39:20] itself, amongst the, the different entities that own it. And there’s a whole host of issues that come [00:39:25] around there. But, yeah, we, we’ve seen a fair amount of tokens and projects [00:39:30] that, you know, struggle with that, today as well.

[00:39:32] Neil: So, but now. [00:39:35] Having value to me doing it as far as I have to look back on the list though, I mean, [00:39:40] I 

[00:39:40] Charlie: thought it was worth a punt. That would be a good story. Yeah. [00:39:45] Coin, you know, 

[00:39:47] Thomas: I remember this crazy dog, dog with fat.[00:39:50] 

[00:39:52] Thomas: I knew I wanted to really quickly touch [00:39:55] upon something that you said that. We found from the technology side of things also, [00:40:00] when it comes to valuation, like we had often clients coming to us, greenfield projects and they’re like, Oh, [00:40:05] we want to build this. We’re like, sure. And they’re like, okay, do you know what it costs?

[00:40:08] Thomas: We’re like, no, we don’t. But we’ll, we’ll [00:40:10] do a workshop. We’ll do research, do a workshop. And after that, we’ll give you a report, you know, with [00:40:15] the tech stack and narrative and, you know, everything involved. And with this, you can [00:40:20] go raise. And they were like, I don’t think we’re going to need it. I was like, I think you do.

[00:40:24] Thomas: And [00:40:25] interestingly, you know, it sounded like three years ago. People were like, yeah, you know what? They use the report [00:40:30] anyway, but it helped them raise for the exact thing that you just said. The minimum evaluation. What does it cost [00:40:35] to build this? And then, you know, we spoke about EOC, MVP and version one, you know, like [00:40:40] product, product, version.

[00:40:42] Thomas: And we often, we, we got feedback from [00:40:45] our clients are like that document you gave us was super helpful in explaining the numbers. Like, [00:40:50] okay, that’s great. It’s just a small part. It’s a tech part, but it’s, it’s so valuable. And if I wanted to like [00:40:55] point that out, because I think it’s often people like, Oh yeah, we’ll just raise a bunch of money and [00:41:00] then we’ll start building.

[00:41:00] Thomas: It’s like, yeah, but you don’t know how much it costs because you’re sitting in an industry that is [00:41:05] completely skewed when it comes to technology. It’s, it’s not [00:41:10] a serial. Entrepreneur comes in in Web3 and is again, a first time [00:41:15] founder, right? So, so I think it’s a very, very good point. [00:41:20] Glad to hear you guys are looking at that too.

[00:41:22] Neil: Certainly that comes across a lot on our [00:41:25] side. You know, trying to understand, like if I’m an investor, I do want to know where the capital is [00:41:30] going, right? I mean, it seems like a logical kind of concept to ask, right? And [00:41:35] so understanding someone’s thought through that process. It’s particularly important.

[00:41:39] Neil: So I agree. [00:41:40] 

[00:41:40] Charlie: So, so to confirm an orange Lamborghini and a beach party is not good. [00:41:45] What? 

[00:41:46] Neil: Look, if it’s a marketing focused company, maybe, I don’t [00:41:50] know, you know, there’s, there’s certain needs. [00:41:55] 

[00:41:56] Charlie: All right. So speaking of, cushion three [00:42:00] here, what are the common pitfalls? Like in your experience, what are the mistakes [00:42:05] that startup make startups make that negatively affect their valuation [00:42:10] and how can these be avoided?

[00:42:12] Neil: Yeah, this one is, And you see a [00:42:15] lot of, pitfalls that can kind of occur, I mean, at different types of [00:42:20] levels. One is, I would say, kind of organizational kind of structuring and [00:42:25] understanding the, the legal and tax implications of things. It’s [00:42:30] not particularly interesting. And the only reason I bring it up first is it’s an area that just, [00:42:35] Considering what we do, it comes up quite often where someone realizes they didn’t do [00:42:40] something right and going back and fixing it can be difficult.

[00:42:43] Neil: But, you know, [00:42:45] making sure you’re with the right counsel, call it legal on the corporate and tax side, [00:42:50] is probably one of the Biggest things, that you need because [00:42:55] those guys are, the gatekeepers to so much, right? I understand in this [00:43:00] space where, you know, now some will argue, from the regulatory [00:43:05] side that, you know, the rules are there, you know, 

[00:43:08] All: I don’t know [00:43:10] what you’re 

[00:43:11] Neil: talking about.

[00:43:12] Neil: And so, and others [00:43:15] might disagree with that concept. And so because of the ambiguity [00:43:20] around that, You want to align yourself with the right, [00:43:25] advisors, particularly on the legal side and legal and tax side so that, [00:43:30] you know, and, and, and those guys are, have to be like [00:43:35] focused on this industry, right?

[00:43:36] Neil: Because there are a ton of lawyers out there. There’s ton of tax guys. But you [00:43:40] need guys who have done this, and do this for a living. [00:43:45] And so. Making sure that you have thought through the concepts [00:43:50] of if I’m going to have a token, what type of token is there? Are there securities issues I have to deal with?

[00:43:54] Neil: If [00:43:55] I’m going to issue tokens, are there valuation implications when I transfer those [00:44:00] tokens? Can I transfer stuff if even if it doesn’t exist? If I’m moving stuff over to different [00:44:05] jurisdictions, are there IP related issues? How do I set up the entities? If [00:44:10] it’s a KMNBVI sub, something like that.

[00:44:13] Neil: Those are all things [00:44:15] that you want to think about like up front, right? You want to make sure [00:44:20] that you have conceptualized that and talk to the right people so that you [00:44:25] know that if we go down that route or if you want to go down another path, You’ve [00:44:30] actually had those conversations, whereas, you know, you start something and then go [00:44:35] down the path and all of a sudden, like I said, you know, you realize that, you know, it’s [00:44:40] structured incorrectly and there’s maybe a tax impact or I have to unwind [00:44:45] things.

[00:44:45] Neil: It’s going to be far more expensive and to do such things. You know, [00:44:50] those are pitfalls we see happen quite often, with folks who are [00:44:55] not, as kind of experienced in the space. And they’re just jumping into this because they heard [00:45:00] about it. So, you know, that’s one thing. And, you know, that kind of that rolls into a lot of other [00:45:05] stuff, I think, in terms of not kind of having a proper, [00:45:10] Understanding of how the company works or how it’s going to work.

[00:45:13] Neil: So then you get into the concept of, [00:45:15] you know, financial management and [00:45:20] ignoring kind of things around, you know, market demand for, for the, the project in of [00:45:25] itself, like you want to try to be, this is a fine line, but, [00:45:30] you want to try to be as focused in on the use case, [00:45:35] as, as you can, right. Thank you.

[00:45:38] Neil: Now, all [00:45:40] startups go through this kind of, you know, start and stop, [00:45:45] Oh, wait, we’re going to try to pivot a little bit. I understand that, but to [00:45:50] start with one thing and then jump to another thing and then jump to another thing, [00:45:55] that kind of, process, is something that, you know, I would, [00:46:00] to the best that you can try to avoid.

[00:46:03] Neil: Right? You know, [00:46:05] I’m all about trying and failing, right? But you got to go all in on something [00:46:10] and really devote your resources to that to make sure that it makes sense. And there’s a ton of [00:46:15] preliminary work you can do around that, but trying to stay focused, I think, is, you know, [00:46:20] while somewhat of an esoteric concept around this, but building towards an [00:46:25] objective is, you know, Is a is a key point here, whereas, you know, meandering [00:46:30] back and forth the different, you know, use cases or types of, [00:46:35] you know, products, can be detrimental.

[00:46:37] Neil: And I can, and as you guys know, I mean, when you’re building a [00:46:40] tech stack, right, you know, and someone says, Hey, well, we want to do this and then we want to do five [00:46:45] other things at the same time. We don’t understand how they’re going to be utilized. You know, [00:46:50] that, that, that kind of comes into play a fair amount, right?

[00:46:53] Neil: Yeah. So 

[00:46:54] Thomas: in that [00:46:55] done that end up crying with filers. Yes. Yeah. 

[00:46:58] Neil: I look, I’m not, you [00:47:00] know, I, I certainly understand that, you know, there’s, there’s a lot of different [00:47:05] directions you can go, but trying to stay as focused as possible on that stuff is certainly very important [00:47:10] because again, if I look at it from the investor’s point of view, you know, what they try to do is they try to [00:47:15] put you in like, you know, a certain.

[00:47:18] Neil: Demographic or [00:47:20] just a box, if you will, of you, what, where’s the, where’s the return on [00:47:25] this? You know, candidly, exactly. How do I, how do I position you in the market? [00:47:30] And that’s how they go through their valuation kind of concepts. I want to make sure that, that my [00:47:35] guys are, you know, You know, focused in, and this use case makes a lot of sense.

[00:47:39] Neil: And that’s why [00:47:40] we’re, we’re putting our money behind them. This team has got the experience and [00:47:45] they are locked into this. So, you know, making sure that you have that [00:47:50] focus and you try to stay true to the initial kind of product concept. [00:47:55] At least the theme around it is certainly very important, very important.

[00:47:58] Neil: So, you know, [00:48:00] just in general, to recap there, I think tax and regulatory [00:48:05] Because it happens to be our area of focus seems to be something that’s [00:48:10] incredibly important and then really kind of focus in on, you know, your [00:48:15] particular, use case and market. And from that, [00:48:20] there’s a lot of good things that can happen, right?

[00:48:21] Neil: When you just put your head down just conceptually and focus in on [00:48:25] it. So, And I guess a third related to that, building [00:48:30] in the right, really the right team around you, right? In addition to [00:48:35] like your external folks, your internal folks, right? You [00:48:40] know, it’s, it’s one thing to just get a bunch of buddies together and start a company, but it’s another thing to [00:48:45] make sure that you all have your defined roles.

[00:48:47] Neil: So to speak, right? So you’ve got the [00:48:50] right tech guys, particularly in this space, right? Understanding, [00:48:55] the underlying concepts around the blockchain technology are, [00:49:00] I mean, I guess it’s so obvious, but I think it’s worth pointing out that you have someone [00:49:05] that understands, you know, how this is going to integrate into the overall, [00:49:10] theme of what you’re putting together.

[00:49:12] Neil: Can’t be understated as well. [00:49:15] So yeah, those are a few of the things that I think in terms of potential [00:49:20] pitfalls that, you know, we see a lot of times where people are just trying to just jump into the space because, you know, there’s that [00:49:25] FOMO effect. Right. So yeah, [00:49:30] just a few thoughts there. 

[00:49:31] Charlie: So what are the key metrics that you think startup founders [00:49:35] should be thinking about with respect to financial metrics, milestones?

[00:49:39] Charlie: What are [00:49:40] the most important things for assessing a startup’s valuation? 

[00:49:43] Neil: Yeah, I think, you [00:49:45] know, It kind of, there’s a few different ways to look at it, but let’s just take the [00:49:50] example of having a token, understanding what we call kind of TVL, [00:49:55] right? Total value locked, within the protocol. That’s a very important metric, [00:50:00] hard to kind of pinpoint, but certainly something that you want to think about.

[00:50:04] Neil: If it’s like a [00:50:05] staking mechanism, call it protocol revenue or staking revenue, right? Trying to model that [00:50:10] out again, that’s kind of correlated to the next metric, which is call it kind of user growth [00:50:15] and retention, right? Around the token, like trying to figure that out, [00:50:20] at least trying to model it out.

[00:50:21] Neil: Those are all things that we particularly try to, [00:50:25] to understand. And then, then that equates to, you know, volume and [00:50:30] velocity of the token. All these are kind of. [00:50:35] That, you know, while somewhat difficult to, [00:50:40] understand, but looking at the market and seeing similar types of [00:50:45] protocols and how they perform, trying to, derive some [00:50:50] sort of, Bands, if you will, of metrics around some of those things, [00:50:55] certainly important.

[00:50:56] Neil: So that’s, you know, if I’m, if I’m putting a protocol [00:51:00] together, those are all things that, you know, we really want to try to hone in [00:51:05] on, as opposed to, again, comparing the web to where you might look at a company and [00:51:10] say, Hey, You know, what’s, you know, total price to, to revenue, right?

[00:51:14] Neil: [00:51:15] Enterprise value to revenue, stuff like that. So those are some of the differences when you’re looking at something at the [00:51:20] protocol level and how it fits into the overall company. 

[00:51:23] Charlie: Brilliant. Okay. Number [00:51:25] five, low valuation strategies. How should I, I mean, this is, this [00:51:30] is one of those questions that you have to know a little bit to, to really engage with.

[00:51:33] Charlie: Mindful, we’re talking [00:51:35] startup founders from zero to one here. How, how should a startup approach the [00:51:40] valuation process? And I think this is specifically towards how much you want the company to be [00:51:45] worth versus how much you’re raising. 

[00:51:47] Neil: I think, when someone comes in [00:51:50] and puts kind of a mark on you, which is on the lower side than what you were expecting, [00:51:55] I think, you know, Going back and reassessing the value proposition, right?

[00:51:58] Neil: And the market positioning, [00:52:00] right? Did you tell that story correctly? Did you pull the right metrics that I just [00:52:05] mentioned right properly? Is your, is your data right on that, right? And then [00:52:10] you, did you describe that use case properly? I think that reassessment [00:52:15] process is something that, is fairly critical and understanding.

[00:52:19] Neil: And [00:52:20] then, you know, you take a look around and you do have the right team. That I’ve put together, right? Am I [00:52:25] focused in on the right? Not only metrics, but the right market, [00:52:30] right? Because again, if I’m, an investor, you [00:52:35] know, if I’m looking at, you know, either You know, a traditional exit strategy from the company [00:52:40] level or what the interest is on the liquidity associated with the token, in the [00:52:45] specific ecosystem, I want to make sure that, you know, you’ve thought [00:52:50] through those types of concepts, fairly detailed, [00:52:55] right, at the end of the day.

[00:52:56] Neil: So, you know, I would say that, you know, those are kind of the key [00:53:00] areas. If I, if someone came to me and said, Hey, um. Yeah, you’re worth [00:53:05] 5 million, but I think, you know, like you, to your point, you know, I feel like I, I should be [00:53:10] worth, you know, 10 to 20. Well, you got to make the use case for that. And the use case is [00:53:15] usually data driven.

[00:53:15] Neil: If you can married with some qualitative factors around, you know, the, [00:53:20] the strength of your team and your overall concept. 

[00:53:22] Charlie: Nice. Okay. Number [00:53:25] six, market impact. I like, this is super variable [00:53:30] with web three and we know it is, but how, how, you know, we’re talking your Tam, [00:53:35] Sam and Sam, the standard, like, how do you calculate your market size, [00:53:40] especially in a sector like, like web three?

[00:53:43] Charlie: I mean, what’s your growth [00:53:45] potential? How should startup founders go about trying [00:53:50] to answer this question? Because I know Thomas and I have seen some decks that have been [00:53:55] pretty fantastical. 

[00:53:57] Neil: Yeah. 

[00:53:58] Charlie: Can you offer some clarity here? [00:54:00] 

[00:54:01] Neil: Yeah, I, at some level, I wish I could, h, [00:54:05] buth, [00:54:10] yeah, I, I think related to my last point, it’s trying to [00:54:15] understand, certain metrics, right.

[00:54:17] Neil: And probably, and while I don’t love [00:54:20] the argument around total value locked, it’s still something that [00:54:25] people point to. And you look at. Similar tokens [00:54:30] in the space again. This is for something that’s really more token driven. And you look at [00:54:35] similar use cases and how companies have progressed over time.

[00:54:39] Neil: [00:54:40] You know, I think that market sizing of understanding how the [00:54:45] utilization and the growth has worked with some of these companies and the value that’s locked [00:54:50] on chain, is a good starting point. Because that’s where the venture investors are going to come [00:54:55] in at and look at and say, okay, you know, is this something where, you know, we’re going to try [00:55:00] to grab market share from this?

[00:55:01] Neil: Or is this something that’s similar? So it can be [00:55:05] something like this, but it’s its own particular kind of area of focus. So, you [00:55:10] know, Yeah, those are areas that I look at and it’s very industry specific. [00:55:15] So, you know, right now we’re really focusing in on, I’ve brought [00:55:20] up a lot of use cases around call it, you know, decentralized finance or defy.

[00:55:23] Neil: But you can look at like [00:55:25] the gaming world, right. And you know, how that is evolving over time and talk about. [00:55:30] An industry, which is not gravitated towards the, [00:55:35] the, the, the concept of the blockchain. Right. And it’s a very, very [00:55:40] finicky space. I think it’s coming back now. And I think, educating the [00:55:45] space is certainly important, but, you know, when I look at.

[00:55:48] Neil: You know, the comps [00:55:50] in the gaming industry, right? You know, that’s a, that’s a way to kind of [00:55:55] market and understand market size and market fit their, [00:56:00] particularly, but you can look at traditional gaming companies and see what some of the, You know, web [00:56:05] three types of gaming companies, what they’re doing and how they’ve kind of raised and what their market values look [00:56:10] like.

[00:56:10] Neil: So, you know, it is industry specific. And there are some, you know, web two kind [00:56:15] of metrics that you can pull from. But, you know, again, you know, once it gets down to [00:56:20] the token understanding, you know, the value that’s locked in a lot of a lot of these [00:56:25] tokens and the potential growth and user retention around it, there are certainly factors that we would kind of try to [00:56:30] hone in on.

[00:56:30] Charlie: So, so in essence, TVL, like velocity [00:56:35] of user growth and, and just really. Being OFA with the market and [00:56:40] what they’re looking at in terms of potential growth and getting some comparisons. 

[00:56:44] Neil: [00:56:45] Yeah, precisely. Right. It’s things that seem fairly obvious, but [00:56:50] once you try to dive in and actually you spend time with some of these [00:56:55] concepts, You can go down a lot of different rabbit holes, but you kind of need to go down that [00:57:00] process, right?

[00:57:01] Neil: It just for an informational purpose and just know that you [00:57:05] can say, Hey, this doesn’t make sense here because we, we tried this or we looked at this [00:57:10] market, concept and it doesn’t really apply, but you want to be able to say that you’ve gone through [00:57:15] that process at the end of the day. 

[00:57:16] Charlie: And then, of course, defend your assumptions.[00:57:20] 

[00:57:20] Charlie: Yes, 

[00:57:21] Neil: that minor 

[00:57:21] Charlie: detail, right? Like be able, be [00:57:25] able to defend the assumptions that you’re making when you’re pitching for capital. All [00:57:30] right, number seven, strategic decisions. And this is, This is, I think it’s one of the [00:57:35] most nuanced questions that we’ve got here, but it’s really about [00:57:40] how strategic choices, such as selecting business models or scaling plans, impact [00:57:45] evaluation from an investor’s perspective.

[00:57:48] Charlie: Cause we’ve, [00:57:50] we’ve got a lot more flexibility than web two here. 

[00:57:52] Neil: Yeah. So [00:57:55] yeah, strategic decisions, certainly are an [00:58:00] important part of this. Is there a particular area around strategic kind [00:58:05] of decisions that you want to focus on? Is it everything from, you know, the, the technology that [00:58:10] you’re going to apply, right?

[00:58:11] Neil: Which chain that you’re going to build on off of, [00:58:15] on, of, to, you know, call it, you [00:58:20] know, corporate and structuring planning. Those are all kind of strategic [00:58:25] hiring. Right. Those are all areas of focus, which, [00:58:30] need, A lot of attention, right? And, you [00:58:35] know, just drawing back to kind of some things I said earlier, I think, you know, the [00:58:40] strategy around how you’re going to organize the company companies, [00:58:45] right?

[00:58:45] Neil: Are you going to have a foundation? Right? Are you going to have like a [00:58:50] governance token? Those type of strategic decisions on where you’re going [00:58:55] to take the overall business? It can’t be, [00:59:00] underestimated in terms of, you know, the importance, right? Because that [00:59:05] strategy is certainly important and that fits into the industry.

[00:59:09] Neil: [00:59:10] That you’re focusing in on. Right. So if I’m going to build some sort [00:59:15] of restaking, call it a network. [00:59:20] Right. And you know, what am I going to build that on? Do I have the relate relationships in [00:59:25] place or strategic partnerships? All of that is because this is so community driven [00:59:30] 

[00:59:30] All: at the end of 

[00:59:30] Neil: the day.

[00:59:31] Neil: That if I don’t have that in place and I don’t focus in on [00:59:35] that, I, the, the success rate is, is fairly low, right? [00:59:40] It already is low just for anything, right? Just any startup. But if I’m [00:59:45] not positioned properly, with the right partners, in [00:59:50] place, which I think is really important. I probably haven’t talked enough about that, but having the right [00:59:55] partners in place, to help with some of those strategic decisions.

[00:59:59] Neil: [01:00:00] And, you know, not just on the legal and, you know, the tax side, but [01:00:05] actually on the overall network, right? Who are the partners are going to help build this out? [01:00:10] You know, depending on what industry you’re in, it’s certainly a very important factor. 

[01:00:14] Charlie: [01:00:15] Intangible assets. I think this is, so just [01:00:20] in like traditional accounting, we call this goodwill.

[01:00:23] Charlie: I think in three, you can pretty [01:00:25] much call it a lot of things, but your, your IP, your [01:00:30] brand reputation, size of your community, these are all. [01:00:35] Intangible, but are factored into a startup’s valuation. [01:00:40] A hundred percent. In fact, on that, like how much is that worth versus, you know, like [01:00:45] we might have a great community, a brand that’s really well recognized, but how do you [01:00:50] attribute A number to that.

[01:00:52] Neil: This is an interesting question because there’s, there’s [01:00:55] different ways to look at it yet. To your point, like in the tax and accounting world, there’s a very, [01:01:00] specific way of trying to value this stuff. But in [01:01:05] this kind of environment, I would say there’s a ton of value in [01:01:10] that. Like when you are putting together a web three company and you see [01:01:15] companies that Raise at, you know, a $5 million raise on a [01:01:20] $50 million, you know, post something like that.

[01:01:25] Neil: [01:01:25] All the value really is in the intangible side of it, right? It’s [01:01:30] all there, right? And then the token in of itself. In theory, at that point, because it doesn’t [01:01:35] exist yet, right? But it’s just the right to this token. The idea around it is a very [01:01:40] small portion of that because, you know, you don’t know where that’s headed.

[01:01:43] Neil: So what someone is really [01:01:45] investing in is, you know, the concept that maybe this token will be worth something, but the overall [01:01:50] infrastructure and the network and the intangible, the brand reputation, IP, even if [01:01:55] it’s open source, all of that stuff. Is is where actually a lot of the [01:02:00] value is. And so you can make the argument that when we are looking at, you know, [01:02:05] total value locked or market comps in general, that value at the [01:02:10] early, early, early stages of things is all spread out through the [01:02:15] intangible asset, call it concept of goodwill, really.

[01:02:18] Neil: It’s all there. [01:02:20] And then as the project Matures and maybe it [01:02:25] launches, right? The network launches. Maybe you have a token. Then the value kind of [01:02:30] shifts, right? A lot of it goes in that pie grows and then the [01:02:35] value associated with maybe that token. All of a sudden it becomes a huge. Piece of that [01:02:40] pie. But until that, that point, right, all the values in this concept, [01:02:45] right?

[01:02:45] Neil: Which is the intangible. So when you see those pre imposed monies [01:02:50] out there, I mean, that’s really what they’re investing in, right? The idea and the concept that this is [01:02:55] going to be something in the future, but at very early stages, it’s really more [01:03:00] intangible than anything else. And you see that in the traditional world as, [01:03:05] as well, you know, without You know, the token concept, but you know, when people are putting in money [01:03:10] on something that has no revenue, right.

[01:03:12] Neil: And we see it all the time, right? And it’s like the vast majority of [01:03:15] startups, they are a couple of years out from actually having revenue. And so they [01:03:20] have to be investing in something and it’s usually that intangible concept where the [01:03:25] value kind of exists, 

[01:03:26] Charlie: team influence. You did mention earlier team is really [01:03:30] important towards valuation.

[01:03:31] Charlie: How, I mean, some of these founders are first time [01:03:35] founders, like how does, The team’s backgrounds. Or [01:03:40] experience, like come into play here. And if you haven’t, you know, [01:03:45] five years at McKinsey, what do you, what do you put on, like, [01:03:50] how, how do you demonstrate that value? 

[01:03:53] Neil: Yeah. You know, this [01:03:55] is a very interesting concept because, and it’s a depressing concept for someone who’s my age.

[01:04:01] Neil: [01:04:00] Because Now, now, now we’re 

[01:04:04] Thomas: [01:04:05] invested.[01:04:10] 

[01:04:10] Neil: I mean, I say that because, and this has been happening in the startup world [01:04:15] forever though, right? A couple of kids come out of college or in college, they come up with this [01:04:20] concept because they have an understanding of trying to put the existing. You [01:04:25] know, industry on its head, right? And say, Hey, why does it have to be done?

[01:04:28] Neil: Because they haven’t [01:04:30] gone through the trials and tribulations of failure of You know, understanding [01:04:35] how traditional business works. And so, you know, that’s why a lot of those fail, but [01:04:40] there’s, you know, we hear about, we have the success bias, right? Because the companies that we end up [01:04:45] working with tend, tend to be, things that are going in the right direction.

[01:04:50] Neil: [01:04:50] But yeah, like on, on the one hand, I say, It [01:04:55] would be great to have, you know, founders who have, you know, five to 10 years of experience have [01:05:00] gone through this and struggled and, and figured it out. But in this industry, [01:05:05] it just doesn’t exist. Right. So you have guys who have very [01:05:10] strong, technical backgrounds, and things because they are coming out of [01:05:15] university and they know other people who have been through this process.[01:05:20] 

[01:05:20] Neil: And so they’ve learned about it and somewhat in academic fashion. [01:05:25] And then just through kind of hearsay of things and it’s developed a concept around it. And [01:05:30] because of that technical, You know, background, they’re able to be successful. [01:05:35] And so, you know, that team can eat, albeit very young, can still be, you [01:05:40] know, do very well in the space.

[01:05:41] Neil: We see it quite often. This, this industry is very much focused [01:05:45] on the younger guys, and understanding kind of, Hey, look, we [01:05:50] understand traditional finance. Again, I bring up, you know, gaming is a perfect example. Those kids have been [01:05:55] playing games forever. 

[01:05:55] Thomas: And 

[01:05:57] Neil: so they understand that, [01:06:00] very well. And so they know that, Hey, this stuff, this is why I’m pissed.

[01:06:03] Neil: Every time someone there’s a blockchain game, [01:06:05] I mean, I can talk to my son all day long about, he’s like, [01:06:10] dad, you know, no one wants to do is, you know, I was talking to someone on the discord channel that [01:06:15] blah, blah, blah. And I’m like, we’ll get there. All right. You will, once you realize [01:06:20] there’s actual value here, you’re going to say, how did this exist [01:06:25] without it?

[01:06:25] Neil: Right. But yeah, like I think this is certainly [01:06:30] skewed towards the younger demographic. What ends up happening, right. As we all kind of [01:06:35] see, especially even older traditional startups is that you, you have these, these projects, [01:06:40] they start up and then I don’t want to use this terminology, but I’m [01:06:45] going to anyway, but you get the adults in the room that come in later who understand the more corporate [01:06:50] stuff that, you know, everyone hates that to have to deal with, but you need it.[01:06:55] 

[01:06:56] Neil: To the point of like the things that we’re talking about, like setting up the right entities [01:07:00] and the right tax stuff and all that kind of stuff. Traditional finance, like you get a [01:07:05] CFO or real COO, stuff like that. Guys who know how to take the business to the next level. Yeah, [01:07:10] you get guys like that that come in, but, certainly the team.

[01:07:14] Neil: [01:07:15] Influence or the team focus at the early stages is still incredibly [01:07:20] important and having guys who at least have the ability to [01:07:25] have that vision at that, that point in time, no matter what age they are [01:07:30] is certainly one of the most important things. 

[01:07:33] Thomas: It’s interesting. We always, [01:07:35] uh. You said like you have builders, sustainers, and evolvers and [01:07:40] for every phase there is someone and, and we, you know, one of [01:07:45] the things that we always did and also ask our clients very often is like, what are you?

[01:07:49] Thomas: And [01:07:50] then sometimes they come to that perspective. They’re like, yeah, well, actually I’m very good at evolving. I’m like, okay, well, [01:07:55] that’s great. But you’re doing a greenfield project right now. You need to build that means flexibility. That means [01:08:00] craziness. Like, are you ready for this? 

[01:08:02] Neil: That’s right. 

[01:08:04] Thomas: And that’s [01:08:05] where the cracks sometimes start.

[01:08:06] Thomas: But. It is a really good question thing to ask yourself as a founder as well as [01:08:10] like, you know, coming, if you come from corporate, you may be [01:08:15] really good at sustaining or evolving, but not necessarily good at the flexibility of a builder. And [01:08:20] please, of course, right, Series A, do you really need that builder startup mindset?[01:08:25] 

[01:08:25] Thomas: Maybe you need somebody who is better at sustaining and a piece of evolving and that builder piece gets, [01:08:30] you know, a lot less percentage In in, you know [01:08:35] making the right decisions because it’s less relevant. 

[01:08:38] Neil: That’s exactly right Yeah, [01:08:40] being able to transition to the next phase is is a key point there. So I agree with you on [01:08:45] percent 

[01:08:47] Charlie: So if you don’t [01:08:50] have that kind of history, what do you suggest they do on the deck?

[01:08:54] Neil: If you don’t have [01:08:55] that type of history, I think this is where it kind of partners come into play. Right. And [01:09:00] saying that you have the right network and relationships, that [01:09:05] you can lean on for a lot of this stuff, is important, right? [01:09:10] It’s not expected that you would have, The necessary like [01:09:15] years of experience, but you want to make sure that whatever you’re focusing in [01:09:20] on right from, an industry perspective and a use case [01:09:25] perspective, you have the knowledge of right?

[01:09:28] Neil: Otherwise, you wouldn’t be building this. [01:09:30] And then that you are positioned with the right partners or [01:09:35] advisors, right? Which are very key. That you can lean on to help [01:09:40] with some of the other aspects that where you’re not like, you may understand the use case, but there’s other [01:09:45] things that need to be considered that you have the ability to lean on, anytime you can.

[01:09:49] Neil: [01:09:50] So yeah, if I’m putting a deck together and I, you know, I’m straight out of college, [01:09:55] or, you know, I’m just young in general in the space, and I’m investing [01:10:00] in you, I, I want to know that. You have the right network of folks that you can lean on. I’m obviously, [01:10:05] obviously like if I’m a seasoned investor and I know the space, then, you know, [01:10:10] I’m going to bring my network to you as well to the extent that I can.

[01:10:13] Neil: But candidly at very early [01:10:15] stages, some of these, you know, you’re, maybe you’re going for angel investors, you know, smaller [01:10:20] investors, you’re not, not everyone’s going to get that a 16 Z, you know, investment right up front, you know? [01:10:25] And so if you’re getting some of the smaller guys, they’re going to care.

[01:10:28] Neil: About, you know, your ability [01:10:30] to have the right knowledge base up front. So if you don’t have it, making [01:10:35] sure that you surround yourself with the right folks that do are certainly something that I would [01:10:40] care about if I’m looking at that deck. 

[01:10:43] Charlie: All right. So [01:10:45] question 10 exit preparations. So for startups looking to eventually sell or go [01:10:50] public.

[01:10:50] Charlie: Are there any strategies you would recommend to ensure their valuation [01:10:55] reflects their true potential, any guardianship moves that they should make? 

[01:10:59] Neil: [01:11:00] Yeah. So the web three space is a little bit different, right? We don’t have traditional exits for the [01:11:05] most part, right? Not everyone is going to be like, I’ll just use Coinbase as an [01:11:10] example where you’re going to try to go public and you know, that’s kind of the success story.

[01:11:14] Neil: And then, you [01:11:15] know, there’s other things that relate to that, but, for the most part, most of these [01:11:20] web three companies, the exit is. It’s, it’s a little bit different. Usually it’s [01:11:25] centered around a token and the token in of itself represents kind of the [01:11:30] liquidity around the exit strategy. And so, [01:11:35] if that’s the case and you’re building something around that, then making sure that.[01:11:40] 

[01:11:40] Neil: The tokenomics associated with your specific [01:11:45] asset that you’ll be distributing, you want to make sure you’ve thought through that process, right? Because [01:11:50] there are a ton of tokens that go out there and just, there’s no liquidity. At the end of the day, [01:11:55] like if I move my, you know, a hundred thousand, you know, tokens, it would [01:12:00] effectively destroy the market.

[01:12:01] Neil: Right. So, in planning for stuff like that, [01:12:05] you want to make sure that you understand how the market [01:12:10] kind of would. Adopt and understand and move with this [01:12:15] specific token at the end of the day. And that’s incredibly hard to do that. [01:12:20] But, understanding that type of concept to the best that you can, [01:12:25] by looking at, you know, other market, you know, comps, again, is probably your, [01:12:30] a good point to, to start with, right?

[01:12:31] Neil: If you want to be the next Solana, [01:12:35] right. At the end of the day, let’s follow their journey. And let’s see how they’ve [01:12:40] moved through that process. You know, how did they issue their tokens? How, what did their [01:12:45] allocation look like at the end of the day? How was that structure built? Right. You know, it was now [01:12:50] that companies, you know, you’ve got a whole network of people who are building on top [01:12:55] of that.

[01:12:55] Neil: Is that something that I would like to do? Right. Do I see like other partners coming in [01:13:00] and building on my use case, and utilizing that, and so then there’s, [01:13:05] there’s a revenue model associated with that relationship. [01:13:10] making sure you’ve thought through that process, right? Is incredibly important when you start [01:13:15] thinking about an exit strategy, because it is, it is rare to see, [01:13:20] you know, an IPO.

[01:13:21] Neil: We are starting to see kind of acquisitions out there a little [01:13:25] bit. But it’s still, you know, in its infancy for, you know, companies with tokens, [01:13:30] right? We’ll see stuff like, you know, infrastructure projects or like, you may be some exchanges out [01:13:35] there or something that’s, you know, Almost like more traditional to web two companies.

[01:13:39] Neil: that [01:13:40] have, you know, web three kind of focus. But, for the most part, a lot of these companies, you [01:13:45] know, the, really the, the value, the expectation is really sitting around how like [01:13:50] the, the token will operate outside in the network. So, you know, those are things that you probably want to think about at the end of the [01:13:55] day.

[01:13:55] Charlie: So now we get to the next section, the brainstorm component, and [01:14:00] here we’ve picked some really interesting topics specifically centered around strategies [01:14:05] for maximizing your startup valuation conversation. I honestly wish. [01:14:10] I had access to yourself, Neil, when I was, running my first, [01:14:15] AI application and again, working in the core team to the startups I [01:14:20] have.

[01:14:22] Charlie: How important would you say is, is [01:14:25] timing and effectively building a strong narrative? 

[01:14:28] Neil: Yeah. [01:14:30] That, that might be the most. Important, kind of aspect to this. I [01:14:35] mean, timing understand that the market is moving in a certain direction and there’s a [01:14:40] market need for something. Right. That is probably one of the most [01:14:45] important factors, right?

[01:14:46] Neil: Like if I’m an investor and I’m looking at something, you know, what’s [01:14:50] the demand for this, right? You know, there’s, there’s, if there’s already a ton of. [01:14:55] Companies in a specific space, you better have some differentiation, at [01:15:00] the end of the day, right? Especially in the token world where there’s, there’s a [01:15:05] ton of tokens out there, there’s a ton of noise, you know, how, what’s [01:15:10] my hook, right?

[01:15:11] Neil: To why this makes a lot of sense. And [01:15:15] so that narrative that, that you are crafting, if you [01:15:20] will, Is particularly important, like understanding there’s real like vision around something like [01:15:25] this, where, you know, if I’m going to be the next, you know, chain link [01:15:30] out there, right, which, you know, I love, that that particular company, [01:15:35] what they put together around oracles and so so forth, like they build an entire network and [01:15:40] ecosystem around that.

[01:15:41] Neil: If I want to be the next. Version of that just [01:15:45] in a different capacity for maybe another industry, you know, what’s the story there, right? [01:15:50] How do I get there? What are like the potential kind of, you know, milestones [01:15:55] that I need to meet, like, Technically operationally, [01:16:00] financially, all of those things that still come from the traditional world, but just spun a little bit [01:16:05] differently in terms of how I have to look at it.

[01:16:07] Neil: Right. And some of the things we’ve talked about [01:16:10] today, right. And 

[01:16:11] All: if 

[01:16:11] Neil: there’s stuff like that, I can’t be, [01:16:15] again, talked about enough in terms of making sure you pitched the right [01:16:20] story. 

[01:16:20] Charlie: I mean, when, when you look at chain link’s story, I mean, their [01:16:25] followers were practically militant, right? Like they really chainlink 

[01:16:29] Thomas: Marines.[01:16:30] 

[01:16:30] Charlie: Yeah. Yeah. And, and it was, sure. And like, I [01:16:35] mean, I’m part, like, I, I, I’m tangential to that game of narrative and, [01:16:40] and what mainly positioning is where I’m, I’m coming from the marketing end is. The [01:16:45] way that they positioned that business and then got people involved in that community was [01:16:50] art as far as I’m concerned, and the motivational factors [01:16:55] around, like, who are we, what are we trying to do and how [01:17:00] clearly and well that was communicated was excellent.

[01:17:03] Neil: Yeah, they did a [01:17:05] fantastic and still do do a fantastic job of like educating the community [01:17:10] on the particular use cases when they have different products that they’re coming out there. They [01:17:15] inform the community, to the nth degree about, you know, why this [01:17:20] makes sense, how you would utilize it, you know, what partners that it makes sense to collaborate with.[01:17:25] 

[01:17:25] Neil: Those guys do a phenomenal job and, you know, just full [01:17:30] disclosure, they are a client of ours and I’ve known them for. You know, several years now, and I still [01:17:35] remember when we started with them. It’s like Well, what is, what is this again? [01:17:40] Okay. You’re going to do, [01:17:45] we can do this. And they’re like, yeah, we were talking about the value of the [01:17:50] link token at that time and, you know, their tokenomics and, you know, how [01:17:55] that works and, you know, this could be something worth something that’s huge, [01:18:00] but, you know, they have, you know, They thought that through in terms of their allocation, at a [01:18:05] very early stage, you know, in terms of what went to different folks in the community, [01:18:10] investors and, you know, the founders, all those guys, because they wanted to make sure that, [01:18:15] you know, this thing is something that people are going to hold and utilize, throughout the [01:18:20] network.

[01:18:20] Neil: Right? Not just something that people are going to take and just exit immediately off of. So, they [01:18:25] built their lock up strategy knowing that. And, yeah, here they are today, and [01:18:30] I love what they put together. So, yeah, I’m right there with you on that one. That’s it. Big [01:18:35] fans. 

[01:18:35] Charlie: Do you feel that their strategic appeal Obviously [01:18:40] product, timing, they nailed that.

[01:18:43] Charlie: But, but it was an idea at the [01:18:45] inception, right? It was like when, what, what, what do you think was [01:18:50] the, I guess, the inflection point or the lever [01:18:55] that was like, okay, I get this. We’re, we’re going to run with it. 

[01:18:59] Neil: Yeah. I [01:19:00] think for them, Well, those guys, I mean, I mean, you got some [01:19:05] crazy like intelligence, it’s sitting in that brainpower that’s there is [01:19:10] incredible.

[01:19:11] Neil: You know, and so not to say that, you know, you have to have a PhD to [01:19:15] do this, but I think those guys, with that [01:19:20] combined with some of the more strategic guys within the organization, they saw that. The long [01:19:25] game here, right? They believe that, the, or the [01:19:30] concept around the oracles and where the current market was, [01:19:35] with the blockchain technology at that time, you know, and wasn’t its [01:19:40] infancy, they had the ability to say, okay, well, here’s where it’s headed, right?

[01:19:44] Neil: [01:19:45] But the concept are again around, On building an [01:19:50] ecosystem, right? And once they figure out that they’re going to build an ecosystem, we’ve, and we’ve seen this in the [01:19:55] past, like they’re like the SAS concept, right? Building a platform, right? The sales [01:20:00] forces of the world, if you will, like, where I’m going to build a platform and people are going to come to [01:20:05] this and, you know, Like once they’ve, they centered around that idea [01:20:10] that, you know, the light kind of comes on.

[01:20:11] Neil: Right. And it’s understanding that inflection point of [01:20:15] where you realize that there is, this isn’t like a couple [01:20:20] million dollar project. This is a billion, you know, multi billion dollar [01:20:25] concept where people can come in and build and develop on that [01:20:30] platform. And I think that, that, that was like a, a key point for them, like [01:20:35] understanding that.

[01:20:36] Neil: The, the end game here, it’s not even really an end [01:20:40] game. It’s just the long term strategy of building out an ecosystem that [01:20:45] everyone can be a part of is something that I think is, it’s got a defining moment, for [01:20:50] those guys at the end of the day. 

[01:20:52] Charlie: So in, in [01:20:55] general, I mean, chaining aside, how do you [01:21:00] feel like crafting compelling story works from the valuation side?

[01:21:03] Charlie: Is that something [01:21:05] which, you know, motivates you? 

[01:21:09] Neil: Yeah. [01:21:10] I would, I would agree with that kind of concept, like the, the crafting of [01:21:15] the story and the narrative. You know, I just kind of the, the [01:21:20] former banker in me would suggest like, that is almost the most [01:21:25] important thing, right? Like when you put together and, you know, coming from, especially on your side, [01:21:30] Charlie, with the, the marketing kind of.

[01:21:31] Neil: Concept and positioning like that [01:21:35] focus needs to be crystal clear, I think for folks when they’re [01:21:40] investing in something or, you know, you’re looking to sell your product out to the folks. [01:21:45] They need to understand exactly what it is that they’re signing up for, [01:21:50] at the end of the day. And so if that messaging isn’t clear from the get [01:21:55] go, if it’s something that’s too esoteric to understand, which.

[01:21:58] Neil: In the web three candy, right? [01:22:00] It’s there’s such, there’s so much noise, right? That, you know, like, Oh, I’m building this [01:22:05] and it’s going to do this. And it’s going to, it’s decentralized. And I throw out a bunch of buzzwords. [01:22:10] It’s like, you know, you just like your head just knocks back and you’re like, what the, that’s where like the [01:22:15] traditional folks in the industry are just like, no.

[01:22:17] Neil: No, thank you. Because you’re trying to scam me, [01:22:20] right? So you have to make sure that I think it’s just [01:22:25] more important for web three companies to make sure that they do their best [01:22:30] to clearly position and market the exact need for what [01:22:35] they’re trying to, you know, Solve, right? The question that they’re trying to solve, right?

[01:22:38] Neil: I think that is [01:22:40] so important, right? So was we’re trying to build a very nascent kind of we’re at a very nascent [01:22:45] space, right? Uh right now and we’re trying to build that into something that is more I [01:22:50] think i’m better understood By the traditional world, right? As we, as much as we [01:22:55] want to be, you know, counter to that, right?

[01:22:57] Neil: Because, you know, the [01:23:00] traditional stuff doesn’t make any sense, right? But we still [01:23:05] need certain, you know, components of that. And, you know, if you’re going to develop market share, you [01:23:10] have to convince, you know, the non believers at the end of the day that they’re make, it [01:23:15] makes sense for them to kind of come on over and utilize this technology.

[01:23:19] Neil: I think. You [01:23:20] know, you’ll see that like in the decentralized finance. We talked about I think gaming will come around you [01:23:25] know, I I think you know, you’re seeing the social network part of it [01:23:30] come into play which seems like a very logical thing like, you know, why should linkedin and [01:23:35] facebook own all my information, right?

[01:23:37] Neil: Why can’t I do it the creator [01:23:40] space all of that stuff where? You know, I, there is a use case for [01:23:45] me to develop a whole kind of business around myself. Right. [01:23:50] If I can sign up for the right companies who understand that are building those [01:23:55] ecosystems, I’m far more compelled to be interested in them than, if it’s just a bunch [01:24:00] of buzzwords.

[01:24:00] Neil: So, 

[01:24:01] Thomas: but this is interesting actually, because if we’re [01:24:05] looking at, you know, looking over the and the compelling narratives that we’ve seen [01:24:10] coming by. I often fail to see, I mean, they’re good, [01:24:15] compelling narratives for web three investors or digger web two VCs that, [01:24:20] have, have, you know, at least a crypto division that understand it.

[01:24:24] Thomas: But [01:24:25] very often it is, it is the buzzwords and, you know, Everything that I was like, [01:24:30] why there’s not the focus on the mass adoption web tool piece, which I think [01:24:35] is very important, right? Like I always make that that example is like, you know, my mom, you know, everybody’s mom, [01:24:40] they need to use it. These are, these are the people that you want it to use, right?

[01:24:44] Thomas: Let’s, let’s, [01:24:45] let’s say decentralized, whereas 

[01:24:46] Charlie: in AI, it’s your pitch deck. Cause no, [01:24:50] 

[01:24:50] Thomas: but, but that’s the point, right? You throw in AI, you throw in LFs, you throw in blockchain. [01:24:55] I’m pretty sure my mom looks at it and she’s like, What is an LLM? Yeah, I, [01:25:00] I, yeah, yeah, and why, and why, and why do I need this?

[01:25:03] Thomas: And I think a [01:25:05] very, what is, what is so important in, in, I think compelling story, what [01:25:10] I sometimes miss is, okay, this is all great. This sounds [01:25:15] super great from the crypto community. You’ll probably onboard them one to one. Let’s go. What about [01:25:20] the rest of web two? What about your end users that really gonna make your product bigger?

[01:25:24] Thomas: Yeah, yeah. [01:25:25] We didn’t really think about it. That’s not in the narrative. And I, I, I’m, I’m wondering [01:25:30] lately more and more because we’re moving towards, everybody wants to move to the mass subscription. Why we’re not touching [01:25:35] that point. Creator economy is the same thing. It’s like, oh yeah, we’re building like the next big [01:25:40] Tumblr or whatever.

[01:25:40] Thomas: It’s like, okay, great. How are you going to onboard these users? Yeah, no, we have all these, we have three users. Okay, that’s [01:25:45] great. We’re not talking about Web3. Your real technology, like the technology you’re really going to use, and it’s going to [01:25:50] be used, is Web2 mass adoption. Where is that compelling story to those folks, right?

[01:25:54] Thomas: And [01:25:55] I’m always curious, like, Are you looking at that from from [01:26:00] evaluation standpoint as well? Because I think a lot of these things are by crypto for crypto, [01:26:05] right? 

[01:26:05] Neil: 100 percent because that’s where like user growth and adoption comes from, right? If I’m going to [01:26:10] really grow this, I can’t rely on just this sliver of an ecosystem [01:26:15] to move the needle for me, right?

[01:26:16] Neil: And especially if it’s something like you just talked about, like, you [01:26:20] know, the creator space or, you know, other spaces where you actually need to [01:26:25] leverage, you know, The broader community at the end of the day, because [01:26:30] they’re the ones that are going to drive it. Right. I’d rather, you know, get that, that percentage of that [01:26:35] network to validate, right.

[01:26:37] Neil: This concept at the end of the day. And [01:26:40] so it is tremendously important. It’s, it’s, it’s part of the assumptions, right. [01:26:45] Candidly, when you’re looking at some of these things where, you know, that adoption, that mass adoption is critical. [01:26:50] 

[01:26:50] Thomas: And that, that’s the point also with me for gaming that I’m always like, okay, I’m, I.[01:26:55] 

[01:26:55] Thomas: I understand the narrative, but I, I’m, there’s no such thing as a Web3 gamer. There’s, [01:27:00] there’s gamers and that’s what everybody gets, gets wrong. It’s like, Oh no, we got to onboard all the Web3 gamers. [01:27:05] Yeah, there’s no Web3 gamer. The Web2 gamer is already done with microtransactions. So, [01:27:10] you know, you better make it make sense.

[01:27:11] Thomas: Right? 

[01:27:13] Neil: That’s right. A hundred percent. [01:27:15] 

[01:27:15] Charlie: So, I just wanted to talk about key performance [01:27:20] indicators. Now KPI is, I mean, we’ve had. I have tried to slide this question [01:27:25] in, into every pod we’ve had, and VCs are like, well, you know, it’s [01:27:30] web three. So. I mean, we all know traditional web two, we all know, [01:27:35] I don’t think that’s fair, but in, in web two, it’s very much how much money you’re making and how much [01:27:40] money the end, right?

[01:27:43] Charlie: Like it is, is the machine [01:27:45] you’ve built generating capital. Has it got future potential? Am [01:27:50] I willing to take the bets on the future potential? And are you, and then, and then you start [01:27:55] to get into the realms of an Amazon play, which is, we’re not going to make money forever until we make a lot of money.[01:28:00] 

[01:28:00] Charlie: And, and at that point you kind of have to be really, really good. [01:28:05] 

[01:28:05] Neil: Right. And how many are left standing after that? Yeah, 

[01:28:09] Charlie: exactly. [01:28:10] And what’s interesting with this space is. A lot like okay, [01:28:15] you you have that interim tranche of I can I can form a token and [01:28:20] like facilitate a liquidity event early Which changes or even [01:28:25] flips the timeline on its head.

[01:28:26] Charlie: You’ve also got a shout out to [01:28:30] Sebastian Spitzer for, for, for this phraseology, but you’ve also, especially in the beginning or something [01:28:35] specifically is quite hot, the founders giving terms to the VCs [01:28:40] about whether or not they can come in on their token. Yeah. And, and that kind of stuff [01:28:45] is happening.

[01:28:45] Charlie: So it’s, I feel like it’s really changed the game for KPIs. 

[01:28:49] Neil: Yeah, [01:28:50] for sure. Right. We don’t have the traditional KPIs and we touched on a little bit [01:28:55] before, right. In terms of, you know, how the, these [01:29:00] networks work, the concept around, you know, the value locked in the token, the TVL, [01:29:05] you know, those are all kinds of ideas around it.

[01:29:10] Neil: [01:29:10] But honestly, it’s really centered around, and we just talked about it now, [01:29:15] but that the user growth and retention around, you know, the tokens in of [01:29:20] itself, right? If, if again, you know, leaving out the companies that are in the [01:29:25] space that don’t have a token for a second, but if you do have a token, right, [01:29:30] You need to build up that that retention of the token.

[01:29:33] Neil: You need to compel people [01:29:35] to want to hold that token. And so that’s why the [01:29:40] restaking and liquidity kind of world is starting to take hold because you have this whole kind of, [01:29:45] financial, sector that is, you know, sitting alongside the [01:29:50] traditional financial sector of like, you know, what hedge funds do and all those guys.

[01:29:53] Neil: Now we, we have [01:29:55] moved this out into the token world and where people actually can make real returns [01:30:00] by, you know, leveraging and creating, you know, more [01:30:05] complex like derivatives on these tokens. So there’s, there’s access to [01:30:10] that and there’s rewards associated with that. And so, you know, [01:30:15] Having, you know, again, if I bring up something like an eigenlayer or Athena, I mean, you’ll look at, you know, they’ve got [01:30:20] billions of dollars kind of locked in there where people have put money in and, you know, they have the [01:30:25] ability to pull out and just make distributions on that, but they can also make [01:30:30] a good amount or a decent return if they leverage their [01:30:35] positions in there.

[01:30:36] Neil: And leverage is scary still at the end of the day that we know we’ve seen things [01:30:40] happen.[01:30:45] 

[01:30:45] Neil: So I, I don’t want to say that, you know, buyer beware, but still, [01:30:50] all we’re doing here though, is we’re taking, just kind of [01:30:55] traditional finance and moving it out into, You know, this decentralized concept [01:31:00] and earning rewards, or tokens through staking or other types of mechanisms, [01:31:05] you know, creates a value proposition, right?

[01:31:07] Neil: Which is something that has really been owned [01:31:10] by, you know, traditional finance folks, right? You know, the wealth managers and the. [01:31:15] The hedge funds of the world, right, have lived in that world. And now this is, you know, something [01:31:20] where, you know, the broader community has access to, and it’s, again, it’s because it’s, it’s [01:31:25] trackable, right?

[01:31:26] Neil: Everything is on the chain, right? So you can see what’s going on and [01:31:30] who’s moving what. So you have a little bit more visibility and things. Those are some [01:31:35] of the, you know, kind of ideas around the metrics and, you know, thoughts. It’s not, [01:31:40] KPIs are probably not the best way to kind of characterize it, but I think it is, there [01:31:45] are still metrics that, you know, we look at.

[01:31:47] Neil: So, you know, again, TDL, maybe [01:31:50] staking revenue, user growth and retention, which is really the [01:31:55] fundamental key here, right? At the end of the day, like I mentioned before, just understanding how that [01:32:00] works. And then, You know, the transaction volume and velocity will follow [01:32:05] right on that. I think, you know, those are areas that we really try to focus in [01:32:10] on when you’re trying to understand how a token can potentially kind of work out there in the market.[01:32:15] 

[01:32:15] Charlie: Yeah, definitely. So I [01:32:20] think this, this, this last point is quite interesting because, because we were talking about like low [01:32:25] valuations and there’s always that trap of like, okay, I’m going to value my business as high as possible so I can get as much of a [01:32:30] raise as I can on the first round. And then you stutter [01:32:35] step or really struggle with the second round because you’ve overvalued your business [01:32:40] And I mean that advice has been there since web 2 That’s that’s not [01:32:45] new but when you’re looking at web 3 you’re like the [01:32:50] valuations are were large, especially last fall I mean big valuations [01:32:55] for ideas, right?

[01:32:56] Charlie: Like I think I think there was a time when you could raise on the back of a [01:33:00] napkin kind of thing. 

[01:33:01] Thomas: Yep Yeah 

[01:33:02] Charlie: How do you deal with?[01:33:05] 

[01:33:09] Neil: I [01:33:10] mean, you hit the nail on the head in a sense that, yeah, these are things that have been dealt [01:33:15] with in the traditional financial markets for years, right? Startup goes and, [01:33:20] you know, oh, the market’s hot. We saw it with SAS companies, right? Very early on, [01:33:25] right? Everything, what’s going to be the next big thing, right?

[01:33:28] Neil: And then, you know, the market kind of [01:33:30] tanks a bit and all these guys are, are left kind of. Yeah. You know, now what do I do? [01:33:35] Because, you know, they overhired, right. And overspent [01:33:40] on certain things. And now they’re, they’re clawing to the next round. They don’t want to take it down round, but [01:33:45] you know, it’s something that they, you know, if they can hold out until the next market kind of movement, 

[01:33:49] All: [01:33:50] you know, 

[01:33:50] Neil: you know, is that something that happens here?

[01:33:53] Neil: In the web three [01:33:55] space, you know, certainly similarities, in that where. You know, you hope that [01:34:00] what you’ve raised, is enough to manage your way through. Now [01:34:05] it’s a little bit different in terms of, you know, the, the rounds themselves, because, [01:34:10] you know, typically the way they come in is it’s either call it like a safe [01:34:15] with like a token warrant, or, you know, we don’t see, but you see, I [01:34:20] mean, you see them, but the priced round concept, doesn’t matter as [01:34:25] much, right?

[01:34:25] Neil: Because if, if my liquidity is really focused around the token, You know, [01:34:30] I mean You can say the pre, the, there’s valuation caps [01:34:35] associated with safes. And what do they really mean? Not really sure because, you [01:34:40] know, that’s just kind of a benchmark that’s thrown out there for the most part. It’s not a true price round.

[01:34:44] Neil: That’s why [01:34:45] you put together like convertible notes or safes in general. And you know, [01:34:50] the positioning around when I take more money in, you’re not as concerned [01:34:55] around, you know, ownership structure there, because if the end game for a [01:35:00] lot of these folks is centered around token allocation. Then, you know, you know, [01:35:05] my, my end game, is something that I really still wanna focus in [01:35:10] on making sure that, you know, my market [01:35:15] and use case is still on point.

[01:35:16] Neil: Right. And that even though the market in and of itself may have [01:35:20] dipped a bit for this particular, you know, sector at the moment, at the end of the day, [01:35:25] you know, what we’re putting together when. You know, everything kind of flushes itself out. It’s still going to make a [01:35:30] lot of sense. And so the token is going to have value because that’s what a lot of these guys care about.

[01:35:34] Neil: [01:35:35] They, they take the equity position because they want their allocation of the token and there’s going [01:35:40] to like liquidity on around that. So you want to make sure that, you’re still [01:35:45] building in the right kind of use case where at the end of the day, if, if you can build value [01:35:50] around the token, In of itself, then everybody went [01:35:55] right.

[01:35:55] Neil: And it’s still a long game because there’s lockups that these investors will have. Right. [01:36:00] In the early days, didn’t have any lockups as we had the pump and dump scheme. But, now we have [01:36:05] lockups associated with where they can’t just. Unload everything at once. And it can go out and follow [01:36:10] almost traditional kind of vesting for equity, right?

[01:36:12] Neil: Where, you know, it is a one year cliff and [01:36:15] then radically after that for a couple of years. So people are compelled to [01:36:20] hold their positions and utilize the network and build upon that. [01:36:25] So even if. You know, the markets kind of go south a bit and people have to [01:36:30] worry about, you know, call it, you know, flat or down rounds.[01:36:35] 

[01:36:35] Neil: It’s not really the end of the world and in my opinion, at least for the web three space because [01:36:40] If the fundamental goal is around You know, the token in of [01:36:45] itself and building out a network that has real utility and value, [01:36:50] then, you know, that is gonna work itself out over time. And that risk hasn’t [01:36:55] changed, right?

[01:36:55] Neil: That’s still going to be the same risk that they had early on because you always have a risk around the token, [01:37:00] like user growth and retention. Like we talked about all of that, At the end of the day, [01:37:05] people still know the expectation there. And so you, even though you may feel like [01:37:10] you’re, you’re taking a flat or down round, you still have the [01:37:15] ability to, to write the ship there.

[01:37:16] Neil: As long as like you stay focused on the ultimate use case and [01:37:20] make sure that the market’s still moving forward. Believes that that’s the case, right. For that particular token. [01:37:25] Right. It, I mean, that is the thing that you have to really focus in on, but that’s the underlying assumption here that [01:37:30] if I’m trying to build the next chain link or something, you know, akin to [01:37:35] that, that my market positioning around that is still solid, but [01:37:40] you know, reassessing that is always something that’s, it’s good to do anyway.[01:37:45] 

[01:37:45] Charlie: Nice. I think that’s it for the brainstorming, Thomas. Yeah. For yourself. 

[01:37:49] Thomas: [01:37:50] No, 

[01:37:52] Charlie: he just wants to go back to the beach. Doesn’t he? He’s just like, [01:37:55] I’m good. Margarita just five minutes, five minutes. 

[01:37:59] Thomas: Yeah. I was just [01:38:00] like, no, no, no, no, don’t come in yet. Don’t come in yet. You know, like, it’s like all these dance.

[01:38:04] Thomas: It’s like, [01:38:05] no, I think, I think this is great. And this is. [01:38:10] Charlie said it earlier, it’s like, I wish I knew you earlier, Neil, and then Charlie comes from the [01:38:15] finance space. I don’t. So these kinds of things, and once [01:38:20] again, clients that we work with in the, in the tech space, we had similar conversations and [01:38:25] they’re asking, okay, where are you?

[01:38:27] Thomas: What do we need to do with this? I’m like, well, I’m the wrong guy to [01:38:30] ask because I’m just doing tech. So, you know, you need, you need Neil as a friend. You need [01:38:35] a few types of tech notes. That, that, that should be probably the answer. 

[01:38:39] Charlie: So, [01:38:40] and finally. Engaging effectively evaluation firms. Again, this is, this is the guy [01:38:45] that, that rates how, you know, how, how good your painting is, right?

[01:38:49] Charlie: [01:38:50] Like how much this should be your best friend working on. Yeah. You don’t want to piss this guy [01:38:55] off 

[01:38:55] Thomas: and him flowers, you know. 

[01:38:58] Charlie: And an example would be an example [01:39:00] of how not to do this is, Grant Cardone on the, undercover [01:39:05] billionaire. That effort, that episode, he [01:39:10] flips off the business valuator.

[01:39:12] Charlie: It’s definitely not the way to do this. [01:39:15] But you know, how, how should someone approach Teknos? How, how should, [01:39:20] you know, how should, what should you have ready? Like what documents do you need to have? 

[01:39:24] Neil: Yeah. [01:39:25] So, you know, we help people across different, Areas of [01:39:30] development, right. In terms of the stage of their project.

[01:39:33] Neil: But for the most part, if you are [01:39:35] going to launch a token, if that’s in your kind of purview, getting [01:39:40] in front of us as soon as possible, makes a lot of sense for a couple of reasons. [01:39:45] One, a lot of the work that we do. is centered around the [01:39:50] distribution of tokens and token rights, you know, either before you’ve raised [01:39:55] money or even when you’re raising money.

[01:39:56] Neil: We talked a little about safe and token warrants, that kind of [01:40:00] thing. Making sure that, you know, We get in front of you at that time [01:40:05] so that we can talk you through, you know, potential issues around, you know, [01:40:10] if you wait till later to make distributions and the valuation around your token [01:40:15] and of itself at early stages, it makes sense.

[01:40:17] Neil: And I talked about it a little bit where, you know, [01:40:20] the value of the token is very low at early stages, but you know, the expectation is going to be [01:40:25] high, but at a very early stage, Early stage, it’s actually okay if it’s low because if I’m going to transfer that [01:40:30] from a taxable perspective, you know, certainly makes a lot of sense.

[01:40:33] Neil: If I’m [01:40:35] going to look to raise, as well, that’s a, it’s a great time to [01:40:40] talk to us. We can certainly help out with an understanding around, you know, the [01:40:45] value This particular, asset class that you’re focusing in on based off [01:40:50] the industry. A lot of times we’ll work hand in hand with, [01:40:55] other consultants, like, and maybe more traditional investment banks that [01:41:00] do have a focus in the space.

[01:41:01] Neil: If they want to do the capital raising part of it. We work with them [01:41:05] around, you know, the valuation side of things. Because we have a very [01:41:10] strong network. Which concludes not only [01:41:15] banks and law firms and tax guys, but, [01:41:20] VCs and angel investors, right. Who are also very keen, on getting [01:41:25] in to, you know, the right projects.

[01:41:27] Neil: And so, you know, If we can [01:41:30] talk to folks early on, that certainly helps, you know, all parties [01:41:35] involved, in terms of what are the things that you would need. And we talked a little [01:41:40] bit, and again, it’s making sure you have that story crafted, right? I [01:41:45] don’t expect the tokenomics to all be worked out, but you know, again, those are [01:41:50] folks that we can make introductions to who focus in on that world.

[01:41:54] Neil: So [01:41:55] again, getting in front of us. Early helps out because, you know, that way we can [01:42:00] understand the message and the narrative that you’re putting together. The valuation [01:42:05] side, the metrics, some of the things that we talked about, are things that we can talk you through. [01:42:10] And then you can tell you like, Hey, listen, you know, this is what we’re seeing in the market here.

[01:42:14] Neil: You [01:42:15] know, maybe you want to position yourself, you know, This way versus another way, [01:42:20] again, so early stages makes a lot of sense. Even at later stages, when [01:42:25] you’re, you’ve already had a couple of rounds of funding, that’s when it gets a little bit more. [01:42:30] And we talked about it. You’ve got adults in the room, asking questions.[01:42:35] 

[01:42:36] Neil: You know, that’s where we help out a lot of folks. [01:42:40] Could be the token’s already live. You have to worry about, you know, what’s going on with [01:42:45] the liquidity around my token. What does that mean for the value of the token if I were to move certain positions? If [01:42:50] I’m going to do a strategic deal with someone, and tokens are a part of it.

[01:42:55] Neil: [01:42:55] Or I’m spinning out IP to someone, or it’s something even a higher [01:43:00] level, it’s more corporate where, you know, you might actually need something like a fairness opinion where, [01:43:05] you know, venture firms may need it, because they have things that are going across [01:43:10] funds. There may be things where you’re exchanging, [01:43:15] Equity and tokens, with related parties, there’s conflicts of [01:43:20] interest.

[01:43:21] Neil: There’s still that fiduciary kind of responsibility that I think people kind of [01:43:25] forget about, just because they think, oh, this is what three of these are tokens, whatever, but the [01:43:30] ownership of something is certainly important. So, yeah, those are all ways that we, we [01:43:35] work with our clients across the spectr if you will, of, of [01:43:40] development.

[01:43:40] Neil: And ecosystems, in this space. So, you know, that’s how [01:43:45] we would, engage with folks. 

[01:43:47] Charlie: Well, I mean, that, that’s what you do. How do [01:43:50] people get in touch? Is it please help? [01:43:55] 

[01:43:55] Neil: They usually just throw a big kind of sign up front. No, I think 

[01:43:59] Thomas: standing your [01:44:00] lawn. 

[01:44:03] Neil: All right. [01:44:05] Yeah. The, the most direct way typically, Is is my email [01:44:10] address or the company’s in the email address, which quite simply is just [01:44:15] info at Teknos associates dot com.

[01:44:18] Neil: And then, you know, my [01:44:20] telegram handle is at N. K. T. underscore [01:44:25] Teknos. So, you know, those are two of the best ways to get in touch with us. I know it’s a little bit more [01:44:30] traditional on the email side, but again, we’re the boring kind of finance guys. So [01:44:35] we still work in an ecosystem where, you know, the people that we have to deal [01:44:40] with on the partner side, Still have to have that line of [01:44:45] communication, if you will, but we’ll move to something that’s more smart contract driven later.

[01:44:49] Charlie: Hey, I mean, [01:44:50] we wear the shirts. We wear the shirts for a reason. 

[01:44:54] Neil: That’s right. There [01:44:55] is a copy here, right? There used to be [01:45:00] a tie. 

[01:45:00] Charlie: Yeah, there’s no tie now, what’s this? No, 

[01:45:04] Thomas: no, [01:45:05] it’s casual, right? Casual. Get this space five years [01:45:10] and you’ll look all like me. So, you know, don’t worry about it. 

[01:45:14] Neil: When we go to the [01:45:15] conferences, it’s hysterical.

[01:45:16] Neil: People can spot someone who is not like, you know, a [01:45:20] builder, like right off the bat. You know, as soon as they see the color, they’re like, all right, well, that guy’s either a VC, [01:45:25] he’s a lawyer, or he’s a banker. Period. , 

[01:45:29] Charlie: they’re, they’re looking, they fine [01:45:30] with, they’re looking for Patagonia. Why? 

[01:45:32] Neil: That’s right. I need the [01:45:35] Patagonia 

[01:45:36] Charlie: Done vc.

[01:45:36] Charlie: This is my favorite part of, of, of, [01:45:40] well, one of my favorite parts of the episode. It is always the Desert Island Essentials. So this [01:45:45] is, if you were to rewind. And, and let’s [01:45:50] say if you were a mini Neil starting off at the beginning of your journey, [01:45:55] and if you were going to give advice to, the younger self [01:46:00] and you were looking at starting a startup, what would, what would be from the, from the [01:46:05] financial, from the valuation, from the forward planning side, what if like you have [01:46:10] no money, no bags, no black book, you know, no connections [01:46:15] whatsoever, what are the five things that you would recommend to [01:46:20] yourself to accelerate that journey?

[01:46:22] Neil: Well, yeah, I think the first thing is [01:46:25] educate myself, right? It’s, it’s read. I mean, there are so many, [01:46:30] accesses to information out there, which I wish, like if this, the [01:46:35] access to knowledge that we have now is so crazy. Now to the point where it’s [01:46:40] fed directly to us, which is a little bit scary, but, you know, if I had the ability to just go [01:46:45] back and say, okay, and let’s start this from scratch, getting [01:46:50] access to.

[01:46:50] Neil: To the right people in the space and through, you know, the literature that’s out there, [01:46:55] would be one of those important things, right? So there, you [01:47:00] know, there’s some books these days that are, are that, [01:47:05] that apply to the space that have been written by folks that are fairly knowledgeable. And, you [01:47:10] know, something that’s recent is the, the book by Chris Dixon.

[01:47:15] Neil: [01:47:15] And that I think is, you know, very powerful, You’ve, [01:47:20] you’ve kind of probably seen the promotion around it. And A16 is very well known space, [01:47:25] but yeah, read, write web. You know, those guys, have [01:47:30] spent a lot of time focusing in on that. And I think, you know, that’s a good read. There’s [01:47:35] also, some more kind of technical stuff.

[01:47:37] Neil: Mastering the blockchain by [01:47:40] Imran Bashir. It’s a great book as well. I think, you know, educating yourselves both on the. [01:47:45] Business side and on the technical side, in terms of understanding what, I [01:47:50] mean, what is the blockchain? What does decentralized mean? Right? Like, let’s start from scratch here. I know [01:47:55] nothing.

[01:47:55] Neil: How do I educate myself to really understand kind of what [01:48:00] it is out there that, you know, there could be potential opportunities on. And then, you know, [01:48:05] between those two, right? You’ve armed yourself a [01:48:10] lot with kind of the potential here of, you know, now I can start thinking about [01:48:15] where’s There are particular demand here in this space.

[01:48:19] Neil: Let me [01:48:20] look at if I could look at, you know, some of the existing technologies [01:48:25] and, you know, how would I might be able to fit something into that? And then, you [01:48:30] know, it has to combine with like, actually cliche again, but like my actual [01:48:35] interests and passion, right? Like if I am a gamer, right. [01:48:40] And I start reading about all of this stuff, like, [01:48:45] does this make sense?

[01:48:45] Neil: Like. Is this something that I would want to devote my time to and put [01:48:50] my passion towards? Because once you turn your passion into like a job, you know, [01:48:55] you’re always like a little bit scared to do that, but you better love what you do in that [01:49:00] perspective. And I think that’s a concept that I don’t know, again, dating myself, but [01:49:05] coming back from more like, Hey, like we’re just almost like programmed, you know, I got to go into finance, [01:49:10] managing consulting, something like that.

[01:49:12] Neil: Now it’s like people really [01:49:15] have the opportunity to kind of apply the things, that they have [01:49:20] passions about. Right. To their everyday life from a work [01:49:25] perspective, and I think that’s what this technology kind of allows us to do at some level, right? It’s [01:49:30] trying to, once people get their head around it, right?

[01:49:33] Neil: You know, [01:49:35] especially like from the creator perspective. We talked a little about that, but, you know, the creator [01:49:40] perspective of, you know, You know, I can be an artist at some level and I can actually make a [01:49:45] living doing that. And I can utilize this technology to do that. Is, is [01:49:50] really powerful, right?

[01:49:50] Neil: Whereas it’s been like that world has been so closed off and [01:49:55] owned by certain types of, you know, commercial folks that, you [01:50:00] know, getting access to that has changed. Now, I mean, I own that, right? And if I [01:50:05] understand how it works through, you know, education, through some of this stuff, then I’m [01:50:10] armed with the ability to do that.

[01:50:11] Neil: To put together, an offering, if you will, [01:50:15] around a product suite. Or a service or you know, [01:50:20] my particular passion, if you will. So, so those are some things that I think about. If I was [01:50:25] really gonna take myself back outside of, you know, you know, buy, buy Bitcoin in [01:50:30] two, 2010,[01:50:35] 

[01:50:35] Neil: but 

[01:50:37] Charlie: should woulda, coulda . 

[01:50:38] Neil: Yeah. I, [01:50:40] I mean, yeah. I mean, if I think about the, the companies that we’ve worked with, like. You [01:50:45] know, the things that I could have known and been a part of, at [01:50:50] that time, you know, you know, I may not be having the same [01:50:55] conversation with you. 

[01:50:56] Thomas: You would be sitting on a 

[01:50:58] Neil: Caribbean island somewhere.[01:51:00] 

[01:51:00] Neil: For sure. 

[01:51:03] Thomas: For 

[01:51:03] Neil: sure. 

[01:51:04] Charlie: [01:51:05] Okay. Number three, I believe. Web three community engagement [01:51:10] governance. 

[01:51:11] Neil: Yes. That’s actually a, that’s a, that’s a really solid one [01:51:15] as well. I think, the, the, like I said before, the [01:51:20] community, is particularly important in this, [01:51:25] environment, right? Web three is all about building a strong community and [01:51:30] getting them to engage, right?

[01:51:31] Neil: It’s, it’s one thing to have just a [01:51:35] network, but you need people actually kind of. Working off of and believing the network and [01:51:40] everything that you’re trying to build there. So that community engagement is [01:51:45] so important in that read, particularly, [01:51:50] Again, can’t can’t be talked about enough, because that’s the underlying kind of [01:51:55] concept between all of this, right?

[01:51:56] Neil: It’s that network effect that we’re talking about in terms of [01:52:00] building out these types of companies. If I mean, like [01:52:05] we all want. And traditional, you know, finance and business, right? It’s all about, [01:52:10] you know, finding your market segment and all of that. But the web three [01:52:15] community is, is meant to be more interactive, right?

[01:52:19] Neil: [01:52:20] We’re supposed to have a dialogue with the people that were putting this, This, this product and [01:52:25] service around. And if I can engage in that, you know, there’s a lot that I can do. And [01:52:30] yeah, I mean, you see that in the traditional world a little bit, right. And that’s why kind of social [01:52:35] media, and the marketing around that has been far more successful, [01:52:40] like in, in something like tech talk, right.

[01:52:41] Neil: You know, the way that the version, [01:52:45] factors work and that far more positive. And then if you, you know, twist that a little [01:52:50] bit into really what the You know, a decentralized kind of Web three [01:52:55] protocol and network is trying to achieve, right? It’s something a lot very similar, right? It’s that [01:53:00] engagement.

[01:53:01] Neil: That we’re talking about. And if I can build that engagement in the community, that [01:53:05] increases the value of the token and increases like the overall returns for everyone. [01:53:10] And then people are compelled to, to engage with this particular product and service because I’m [01:53:15] going to be rewarded with these types of incentives, then you would, [01:53:20] vastly improve your ability to be successful as an organization.

[01:53:23] Neil: So, [01:53:25] certainly things that, That that level of engagement and community, [01:53:30] building and, And then, yeah, obviously the governance side of it, too, [01:53:35] making sure that, you know, people are managing that properly can’t go, [01:53:40] again, overlooked in this process. And [01:53:45] then, you know, some other things this again, cliche, but, [01:53:50] you gotta be You gotta have thick skin to do this.

[01:53:54] Neil: [01:53:55] Honestly, because you’re going to get hit in the face a lot with, you [01:54:00] can’t do this, this doesn’t make any sense. You know, we’ve seen this before. [01:54:05] I, I, I said that, you know, You should [01:54:10] stay focused, but there’s still trial and error here, right? You are going to fail, [01:54:15] multiple times, right? And it’s just trying.

[01:54:18] Neil: Okay, well, this didn’t work, but let’s [01:54:20] try it this way, right? It’s staying. The goal is still there, right? The defining [01:54:25] moment is, you know, it’s going to come. But, you know, just like any kind of engineer [01:54:30] would, right? You have to trial and error all the way through it so that [01:54:35] you have to kind of work through all of that to make sure that, you [01:54:40] know, you, you stay focused on the end goal.

[01:54:43] Neil: So, you know, that, [01:54:45] That resilience and call it flexibility without moving [01:54:50] too far off, like the key kind of point of what you’re trying to build is certainly important. [01:54:55] And then the last side of it is, you know, this is like the, [01:55:00] you know, again, boring finance part of me, but You know, there are a ton of [01:55:05] resources on cap tables, term sheets, you know, venture [01:55:10] investing, a billion things out there.

[01:55:13] Neil: Like I would make [01:55:15] sure I do my diligence on that part of it. Right. [01:55:20] So when someone comes to you and says, Hey, you know, what is, you know, pre post [01:55:25] money, what, what does that mean for, you know, some 20 X dollars and what percentage of the company, what [01:55:30] percentage of, in this instance, how does allocation [01:55:35] work on the token cap table, if you will.

[01:55:38] Neil: And then, and also knowing that the [01:55:40] token cap table doesn’t necessarily mean I have ownership in the company. There are plenty of people have tokens that don’t aren’t [01:55:45] the investors in the organization, understanding that relationship between the two, which are [01:55:50] things that are pointed out in Chris’s book, I believe, if I remember correctly.

[01:55:54] Neil: [01:55:55] But understanding the financial, Aspects of [01:56:00] this, at that level are certainly important. So, you know, [01:56:05] unless you’ve got something that is just so compelling that you don’t have to worry about any of that stuff, [01:56:10] I, I would highly recommend just the [01:56:15] education around just almost like traditional investing.

[01:56:17] Neil: But these days there’s enough [01:56:20] in terms of resources, out there to educate yourself on both [01:56:25] the traditional venture side, as well as, you know, what, you know, The, [01:56:30] the token allocation or the tokenomics, how they fit into, [01:56:35] traditional arrays as well. So, you know, if I could just, I guess, summing it all up, [01:56:40] it’s, you know, looking at, taking a look at Chris’s book, [01:56:45] as well as, you know, Imran’s book, Mastering the Blockchain, [01:56:50] engagement and community governance, certainly very important, [01:56:55] not being afraid to fail that, that resilient [01:57:00] mindset.

[01:57:00] Neil: And then. As, an education [01:57:05] around, venture term sheets and investing, as it relates [01:57:10] to the, the Web3 space. Those are kind of the areas I think I would, And [01:57:15] of 

[01:57:15] Charlie: course, buying Bitcoin early. [01:57:20] 

[01:57:20] Neil: Build a time machine, first 

[01:57:22] Charlie: thing. 

[01:57:23] Neil: Buy Bitcoin. [01:57:25] Neil, 

[01:57:26] Charlie: I can’t thank you enough for spending your time with us here today.

[01:57:29] Charlie: The [01:57:30] only thing I can ask is you could tell, Our audience where they can find you how they can get in touch with [01:57:35] Teknos and where they can learn more 

[01:57:36] Neil: Yeah, no, I appreciate it. This has been a real pleasure guys. Thank [01:57:40] you so much for the time. Yeah coming directly at us through our website [01:57:45] certainly makes a lot of sense.

[01:57:45] Neil: Uh Teknos associates. com you actually can [01:57:50] find all of our emails and Uh all that stuff to contact us directly [01:57:55] there but uh for the sake of just [01:58:00] providing one info at Teknos Associates dot com. And then my telegram is NKT_ [01:58:05] Teknos. 

[01:58:07] Charlie: Thomas, you want to close us out? 

[01:58:08] Thomas: Thank you for listening.

[01:58:09] Thomas: If you [01:58:10] make it this far, it wasn’t an amazing podcast. Neil, thank you very much for spending time with us [01:58:15] today. We’re, we’re happy to post this, [01:58:20] like and subscribe and repost because we’d love to see our, our [01:58:25] content, on LinkedIn, on TikTok, on Twitter, because we know it’s good. Thank you.[01:58:30] 

[01:58:31] Neil: Thanks [01:58:35] guys.[01:58:40]