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Founders are realizing that transparency, audience, and engagement are significant advantages in today’s business environment.
The invention of the internet, and the adoption of social media specifically, has led to a new set of tools being available to entrepreneurs as they build their companies. Rather than operating behind closed doors, a new crop of companies are using these tools to build highly defendable moats. Here are a few examples:
Austen Allred and Lambda School — The company is taking on the big, bad higher education system by providing free computer science education to students. Think of it as a coding bootcamp on steroids. The best part? Students don’t pay for the education unless they earn $50,000 or more post-Lambda School. The cost isn’t paid with debt either, but leverages Income Sharing Agreements instead. Austen has expertly used Twitter to build a loyal following, drive the acquisition cost of students down, drastically increase the tech community’s support of the company, and generally create a situation where Lambda School has a sense of inevitability to it now. It would be incredibly difficult for someone to recreate the magic of Austen’s Twitter account, let alone compete head-to-head with the fast growing startup.
Barstool Sports — The controversial media startup has grown from a one-man operation into a $100+ million empire. Dave Portnoy and his band of social media mavens have created one of the most engaged audiences on the internet, which allows the company to rally the troops around ideas, sell merchandise, drive attendance at events, and monetize a media company in a way that was previously unseen. When the company makes a mistake, they immediately admit it publicly and keep pushing forward, which has led to a level of authenticity and raw fanaticism that is rare in business.
Kraken — The cryptocurrency exchange was recently faced with navigating the highly debated BitcoinSV debacle, which left the exchange wondering if they should continue to support the Bitcoin fork or delist it. Rather than try to make the decision in a unilateral manner, Kraken ran a Twitter poll that made the decision easy. This level of transparency and customer engagement is absent in the legacy financial system, which helps companies like Kraken stand out.
As Paul Graham of YCombinator famously says, find 100 customers that absolutely love you, rather than 1,000 customers that sort of like you. Each of the examples above, along with many more for-profit companies today, are figuring out that highly engaged, loyal audiences are a defendable moat worth building.
As crypto networks become more popular and pervasive, I anticipate that this community/network building skill set will become more important. Teams will start to sink significant dollars into building repeatable, scalable models that produce these audiences. We started to see this with the “Telegram community building” during the 2017 ICO boom (teams would race to get as many people into their Telegram messaging chats and then brag about it to investors as a sign of traction), but that was just the tip of the iceberg.
Audience is a new currency. Those that have it, have incredible power. Those that don’t are starting at a disadvantage. Whether entrepreneurs are building crypto networks or for-profit companies, those who control the message, control the future.
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Trading App eToro Launches Crypto Versions of 8 Major Currencies: A popular trading app is betting people will have an appetite for digitized versions of other major currencies including euros, yen, and Swiss francs. On Tuesday, eToro said it would offer a total of eight stablecoins as part of the broader launch of a crypto exchange service called eToroX. CEO Yoni Assia said the introduction of the stablecoins is just the start of an ambitious plan to offer tokenized version of other assets, including precious metals and fine art. Read more.
Startup Arca Seeks SEC Approval for US Treasury Bond-Backed Stablecoin: Arca Investment Management is seeking regulatory approval to sell a new type of stablecoin to retail investors. The Los Angeles-based digital asset manager filed a prospectus with the Securities and Exchange Commission Friday for a bond fund whose shares would be tokenized on the ethereum blockchain. The Arca U.S. Treasury Fund is expected to be approved later this year, a spokesperson said. It would be available to the general public, but not traded on any stock exchange or alternative trading system, according to the filing. Read more.
Sirin Labs Lays Off 25% of Staff Amid Poor Blockchain Phone Sales: Israel-based Sirin Labs, maker of the Finney blockchain phone, has laid off a quarter of its workforce. The firm said it had let go of 15 of its 60 employees – less than had been speculated in the media. The layoffs come amid a disappointing consumer reaction to the firm’s recently launched blockchain phone. “Sales are not what we expected,” Sirin told Globes. The device started shipping in November 2018, and notably features a cold (offline) crypto wallet that is effectively a second device in the same housing as the phone. Read more.
LedgerX Reveals Bid to Beat Bakkt to Physical Bitcoin Futures Launch: Cryptocurrency derivatives provider LedgerX plans to become the first U.S. firm to offer physically settled bitcoin futures contracts. The company announced Monday that it has filed for a designated contract market license, which would allow LedgerX to offer physically-settled bitcoin futures products to its customers. Unlike the cash-settled bitcoin futures offered by CME Group (and previously, Cboe), customers would receive the actual bitcoin underlying a contract after it expires, rather than the U.S. dollar equivalent. Read more.
Chainalysis Caps Series B Funding With $6 Million From Two Japanese Heavyweights: United States-based blockchain intelligence firm Chainalysis has raised a further $6 million from two major Japanese investors, the company confirmed in a blog post on April 16. Chainalysis, which secured $30 million at the start of its Series B round in February, has hinted it will target the Japanese market in the future as it aims to ingratiate its compliance technology with banks and other financial institutions. Read more.
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