The New Way To Start a Startup

How startups are generating $1,00,000,000s of market cap in less than 10 years without VCs.

A typical business is a for-profit organization striving to gain market share, grow revenue and increase their stock price year over year. For a long time this was the most effective way for a project to grow and for founders to become rich. That was until Ethereum came along. .

Ethereum Revolutionizes Startup Structures

Ethereum is an open-source platform that facilitates the development of next-generation decentralized applications. It was conceptualized in 2013 by Vitalik Buterin, who at the time was conducting research within the Bitcoin community. Since Buterin’s initial ideation, Ethereum has grown in interest and scale; today it is poised to overhaul open-source development

What makes Ethereum unique is not only its open source technology, but how the founders decided to structured their company leading them to become billionaries in a few years.

Founders of Ethereum

The 8 Founders of Ethereum

After Buterin unveiled the Ethereum white paper, several other members joined the ranks including CEO of IOG Charles Hoskinson, Decentral CEO Anthony Di Iorio and Akasha Founder Mihai Alisie. Buterin also introduced two new co-founders to the team: co-founder Dr. Gavin Wood who did much of the early programming and architecting of the platform and co-founder Joseph Lubin went on to found the Brooklyn-based ConsenSys, a startup that focuses on building decentralized apps.

The Decision of How To Structure The Business of Ethereum

Basically, there were 2 options at this point.

Option 1: Venture capital money. There was a ton of interest in this space financially at this point, and with Ethereum’s potential, it would be a no-brainer.

Option 2: The crowdsale option. Raising money from the people. A Crowdsale is basically crowd-funding for crypto. Early-interest enthusiasts can buy coins before they exist to help fund the project in development, in hopes that it’ll be big and juicy once it’s ready.

This decision was big. It is what began the tension. Charles Hoskinson spoke up and stated that he thought Ethereum was too big at this point to go for a crowdsale. He strongly argued that the best course of action was to create this as a “for profit” company, take VC investment, centralize in Switzerland and focus on building a protocol.

On the contrary, the developer side of the team argued for the set-up of a foundation. That this “foundation” could hold a crowdsale and use that to fund a collection of companies within Ethereum to build up an ecosystem and let anyone participate that wanted to. This would hereby create a completely horizontal power structure.

The Tension on Ethereum’s Future

Vitalik decides on the future of Ethereum

Well, the arguments began and they continued and after weeks of fighting, the founding group only grew only more separate.

The final decisions meeting is to be held at the Ethereum team’s secluded house in the woods known as “The Spaceship” to decide the future of this organization.

After a full day of discussion, Vitalik made the final call: Charles Hoskinson’s side loses the fight. The “devs side” wins. And with that, Charles and Amir were gone from the Ethereum project and Vitalik launches the Ethereum Foundation as a non-profit organization managed from Zug, Switzerland dedicated to supporting Ethereum and related technologies.

The EF is not a company, or even a traditional non-profit. Their role is not to control or lead Ethereum, nor are they the only organization that funds critical development of Ethereum-related technologies.

In 2014, the first ETH crowdsale went live where more than 7 million ether, or about $2.2 million, were sold just in the first 12 hours.

As of September 2021, the foundation’s multisig wallet holds 868 Ether. That equates to ~$1,361,000,000. It is currently not known how much the Ethereum Foundation spends on its organization and grants every year.

By choosing the route of an ICO versus an initial funded for profit business organization, the founders of Ethereum generated far more value. Vitalik’s main Ether account currenlty holds over $4.5 million worth of Ethereum and the total market market cap of Ethereum is over $400 billion.

Other Examples

Yieldbox: defi on Stellar

Yieldbox Token Distribution

Yieldbox provides a total supply of YBX tokens capped at 1.5 billion. Of these 1.5 billion, 810 million will be distributed over 10 years to protocol users, 375 million will be allocated to the YieldBlox DAO treasury, 150 million will be allocated to a partnership treasury, 35 million will be allocated to a bug bounty program, 10 million will be allocated to the airdrop, and the remainder will be distributed to the initial team and investors.

Yieldbox was able to attract investors by offering YBX tokens as well as fund their initial launch with a sizable grant from the Stellar Seed Fund

Solana

Solana followed a hybrid approach by launching an initial coin offering for both venture capitalists and individual investors. Solana was able to sell coins to and raise over $335 million from Andreessen Horowitz, Polychain, Multicoin Capital.

Additionally, on April 8th, 2020 Solana Labs transferred all IP related to the protocol and 167m SOLs to the Solana Foundation. Solana Labs plans to transfer more SOLs to the Foundation. Solana Labs expects to retain a small number of SOL tokens to support operations (estimated to be 50m, but this is subject to change).

This 167m SOL is currently worth $79,826,000,000

Quant

Quant Network is a blockchain technology company looking to achieve universal interoperability between blockchains using its Overledger OS blockchain operating system. In contrast to other cryptocurrency projects, Quant Network is not open source and much of the technology used in its products is patented, requiring licensing to use

QNT is an ERC-20 token used to pay for goods, services, and licensing fees in the Quant Network ecosystem. Following a token burn in September 2018, the maximum supply of QNT is just over 14.5 million. QNT is neither inflationary nor deflationary.

Roughly 4.5 million tokens have been allocated to the Quant Network, whereas the remaining 10 million tokens are on the market. Quant Network appears to have sold some of their tokens since the 2018 burn, as there is around 12 million QNT currently in circulation.

Currently that 4.5 million QNT is worth $1,350,000,000.

Summary

The new age of startups will be funded with a hybrid model of crowd-funding ICOs and investor coin offerings. Equity will play less of a role in place of tokens representing market cap and generating trillions dollars of value already in a few years

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