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Web3 Marketplaces (with Braintrust CEO Adam Jackson)

Limited Partner Episode

October 26, 2021
October 26, 2021

We sit down with Adam Jackson, the cofounder and CEO of Freelance Labs, which builds the incredible Web3 project Braintrust. (Disclosure David is an investor via Kindergarten Ventures.) We talk all about what a marketplace looks like in Web3, and why it's a completely different animal than traditional Web2 marketplaces like Uber, eBay, DoorDash, etc. Prior to starting Braintrust, Adam was the CEO of Doctor on Demand, so has literally lived both sides of the table. Tune in for a FASCINATING discussion of everything that crypto / tokenization enables, and why it's such an exciting shift that unlocks massive, $000B+ opportunities like Braintrust.

We finally did it. After five years and over 100 episodes, we decided to formalize the answer to Acquired’s most frequently asked question: “what are the best acquisitions of all time?” Here it is: The Acquired Top Ten. You can listen to the full episode (above, which includes honorable mentions), or read our quick blog post below.

Note: we ranked the list by our estimate of absolute dollar return to the acquirer. We could have used ROI multiple or annualized return, but we decided the ultimate yardstick of success should be the absolute dollar amount added to the parent company’s enterprise value. Afterall, you can’t eat IRR! For more on our methodology, please see the notes at the end of this post. And for all our trademark Acquired editorial and discussion tune in to the full episode above!

10. Marvel

Purchase Price: $4.2 billion, 2009

Estimated Current Contribution to Market Cap: $20.5 billion

Absolute Dollar Return: $16.3 billion

Back in 2009, Marvel Studios was recently formed, most of its movie rights were leased out, and the prevailing wisdom was that Marvel was just some old comic book IP company that only nerds cared about. Since then, Marvel Cinematic Universe films have grossed $22.5b in total box office receipts (including the single biggest movie of all-time), for an average of $2.2b annually. Disney earns about two dollars in parks and merchandise revenue for every one dollar earned from films (discussed on our Disney, Plus episode). Therefore we estimate Marvel generates about $6.75b in annual revenue for Disney, or nearly 10% of all the company’s revenue. Not bad for a set of nerdy comic book franchises…

Marvel
Season 1, Episode 26
LP Show
1/5/2016
October 26, 2021

9. Google Maps (Where2, Keyhole, ZipDash)

Total Purchase Price: $70 million (estimated), 2004

Estimated Current Contribution to Market Cap: $16.9 billion

Absolute Dollar Return: $16.8 billion

Morgan Stanley estimated that Google Maps generated $2.95b in revenue in 2019. Although that’s small compared to Google’s overall revenue of $160b+, it still accounts for over $16b in market cap by our calculations. Ironically the majority of Maps’ usage (and presumably revenue) comes from mobile, which grew out of by far the smallest of the 3 acquisitions, ZipDash. Tiny yet mighty!

Google Maps
Season 5, Episode 3
LP Show
8/28/2019
October 26, 2021

8. ESPN

Total Purchase Price: $188 million (by ABC), 1984

Estimated Current Contribution to Market Cap: $31.2 billion

Absolute Dollar Return: $31.0 billion

ABC’s 1984 acquisition of ESPN is heavyweight champion and still undisputed G.O.A.T. of media acquisitions.With an estimated $10.3B in 2018 revenue, ESPN’s value has compounded annually within ABC/Disney at >15% for an astounding THIRTY-FIVE YEARS. Single-handedly responsible for one of the greatest business model innovations in history with the advent of cable carriage fees, ESPN proves Albert Einstein’s famous statement that “Compound interest is the eighth wonder of the world.”

ESPN
Season 4, Episode 1
LP Show
1/28/2019
October 26, 2021

7. PayPal

Total Purchase Price: $1.5 billion, 2002

Value Realized at Spinoff: $47.1 billion

Absolute Dollar Return: $45.6 billion

Who would have thought facilitating payments for Beanie Baby trades could be so lucrative? The only acquisition on our list whose value we can precisely measure, eBay spun off PayPal into a stand-alone public company in July 2015. Its value at the time? A cool 31x what eBay paid in 2002.

PayPal
Season 1, Episode 11
LP Show
5/8/2016
October 26, 2021

6. Booking.com

Total Purchase Price: $135 million, 2005

Estimated Current Contribution to Market Cap: $49.9 billion

Absolute Dollar Return: $49.8 billion

Remember the Priceline Negotiator? Boy did he get himself a screaming deal on this one. This purchase might have ranked even higher if Booking Holdings’ stock (Priceline even renamed the whole company after this acquisition!) weren’t down ~20% due to COVID-19 fears when we did the analysis. We also took a conservative approach, using only the (massive) $10.8b in annual revenue from the company’s “Agency Revenues” segment as Booking.com’s contribution — there is likely more revenue in other segments that’s also attributable to Booking.com, though we can’t be sure how much.

Booking.com (with Jetsetter & Room 77 CEO Drew Patterson)
Season 1, Episode 41
LP Show
6/25/2017
October 26, 2021

5. NeXT

Total Purchase Price: $429 million, 1997

Estimated Current Contribution to Market Cap: $63.0 billion

Absolute Dollar Return: $62.6 billion

How do you put a value on Steve Jobs? Turns out we didn’t have to! NeXTSTEP, NeXT’s operating system, underpins all of Apple’s modern operating systems today: MacOS, iOS, WatchOS, and beyond. Literally every dollar of Apple’s $260b in annual revenue comes from NeXT roots, and from Steve wiping the product slate clean upon his return. With the acquisition being necessary but not sufficient to create Apple’s $1.4 trillion market cap today, we conservatively attributed 5% of Apple to this purchase.

NeXT
Season 1, Episode 23
LP Show
10/23/2016
October 26, 2021

4. Android

Total Purchase Price: $50 million, 2005

Estimated Current Contribution to Market Cap: $72 billion

Absolute Dollar Return: $72 billion

Speaking of operating system acquisitions, NeXT was great, but on a pure value basis Android beats it. We took Google Play Store revenues (where Google’s 30% cut is worth about $7.7b) and added the dollar amount we estimate Google saves in Traffic Acquisition Costs by owning default search on Android ($4.8b), to reach an estimated annual revenue contribution to Google of $12.5b from the diminutive robot OS. Android also takes the award for largest ROI multiple: >1400x. Yep, you can’t eat IRR, but that’s a figure VCs only dream of.

Android
Season 1, Episode 20
LP Show
9/16/2016
October 26, 2021

3. YouTube

Total Purchase Price: $1.65 billion, 2006

Estimated Current Contribution to Market Cap: $86.2 billion

Absolute Dollar Return: $84.5 billion

We admit it, we screwed up on our first episode covering YouTube: there’s no way this deal was a “C”.  With Google recently reporting YouTube revenues for the first time ($15b — almost 10% of Google’s revenue!), it’s clear this acquisition was a juggernaut. It’s past-time for an Acquired revisit.

That said, while YouTube as the world’s second-highest-traffic search engine (second-only to their parent company!) grosses $15b, much of that revenue (over 50%?) gets paid out to creators, and YouTube’s hosting and bandwidth costs are significant. But we’ll leave the debate over the division’s profitability to the podcast.

YouTube
Season 1, Episode 7
LP Show
2/3/2016
October 26, 2021

2. DoubleClick

Total Purchase Price: $3.1 billion, 2007

Estimated Current Contribution to Market Cap: $126.4 billion

Absolute Dollar Return: $123.3 billion

A dark horse rides into second place! The only acquisition on this list not-yet covered on Acquired (to be remedied very soon), this deal was far, far more important than most people realize. Effectively extending Google’s advertising reach from just its own properties to the entire internet, DoubleClick and its associated products generated over $20b in revenue within Google last year. Given what we now know about the nature of competition in internet advertising services, it’s unlikely governments and antitrust authorities would allow another deal like this again, much like #1 on our list...

1. Instagram

Purchase Price: $1 billion, 2012

Estimated Current Contribution to Market Cap: $153 billion

Absolute Dollar Return: $152 billion

Source: SportsNation

When it comes to G.O.A.T. status, if ESPN is M&A’s Lebron, Insta is its MJ. No offense to ESPN/Lebron, but we’ll probably never see another acquisition that’s so unquestionably dominant across every dimension of the M&A game as Facebook’s 2012 purchase of Instagram. Reported by Bloomberg to be doing $20B of revenue annually now within Facebook (up from ~$0 just eight years ago), Instagram takes the Acquired crown by a mile. And unlike YouTube, Facebook keeps nearly all of that $20b for itself! At risk of stretching the MJ analogy too far, given the circumstances at the time of the deal — Facebook’s “missing” of mobile and existential questions surrounding its ill-fated IPO — buying Instagram was Facebook’s equivalent of Jordan’s Game 6. Whether this deal was ultimately good or bad for the world at-large is another question, but there’s no doubt Instagram goes down in history as the greatest acquisition of all-time.

Instagram
Season 1, Episode 2
LP Show
10/31/2015
October 26, 2021

The Acquired Top Ten data, in full.

Methodology and Notes:

  • In order to count for our list, acquisitions must be at least a majority stake in the target company (otherwise it’s just an investment). Naspers’ investment in Tencent and Softbank/Yahoo’s investment in Alibaba are disqualified for this reason.
  • We considered all historical acquisitions — not just technology companies — but may have overlooked some in areas that we know less well. If you have any examples you think we missed ping us on Slack or email at: acquiredfm@gmail.com
  • We used revenue multiples to estimate the current value of the acquired company, multiplying its current estimated revenue by the market cap-to-revenue multiple of the parent company’s stock. We recognize this analysis is flawed (cashflow/profit multiples are better, at least for mature companies), but given the opacity of most companies’ business unit reporting, this was the only way to apply a consistent and straightforward approach to each deal.
  • All underlying assumptions are based on public financial disclosures unless stated otherwise. If we made an assumption not disclosed by the parent company, we linked to the source of the reported assumption.
  • This ranking represents a point in time in history, March 2, 2020. It is obviously subject to change going forward from both future and past acquisition performance, as well as fluctuating stock prices.
  • We have five honorable mentions that didn’t make our Top Ten list. Tune into the full episode to hear them!

Sponsor:

  • Thanks to Silicon Valley Bank for being our banner sponsor for Acquired Season 6. You can learn more about SVB here: https://www.svb.com/next
  • Thank you as well to Wilson Sonsini - You can learn more about WSGR at: https://www.wsgr.com/

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Transcript: (disclaimer: may contain unintentionally confusing, inaccurate and/or amusing transcription errors)

David: Hello, LPs. Welcome to a very, very special episode of the LP show.

Ben: Two verys.

David: Two verys. Not only is it special because the episode and our guest in and of himself and themselves are special, but I think this is the first episode where we’re recording with a Kindergarten Ventures portfolio company.

Disclaimer: Kindergarten Ventures—the small fund that I am a GP in—is a very small investor in Braintrust, but we are so excited to share a little more about the company and to have Adam Jackson (the CEO) on to talk about Braintrust, marketplaces, crypto, the intersection between all of those things.

Adam’s been doing things on the Internet for a long, long time, but immediately prior to Braintrust, you were the CEO of Doctor On Demand—which we can talk about a little bit—and now is the co-founder and CEO of Braintrust. Welcome to the show and thank you for joining us.

Adam: Thank you, guys, for having me. I’ve been an LP subscriber for a little while here, so fan of your work. I have to ask, can you tell me anything about—sorry if you’ve already said this before; I missed it—the naming behind Kindergarten Ventures? I have two kids in kindergarten—twin boys—they are a lot of things but helpful with building this business is not one of them. The two of you, just in a short time, have been involved and been super helpful with Braintrust. Is it an ironic thing, like we’re going to help as if we were kindergarteners?

David: This is great. I remember we’ve never told the story anywhere before. No, it does not have to do with current kindergarteners. Nat Manning, my partner in Kindergarten or the other GP with me, we met when we were in kindergarten back in Pennsylvania. That is the origin. And actually, he’s a full-time founder and at Acquired, this is very much a side thing for us.

We were debating what to name the firm and we were debating between Kindergarten Ventures and sort of a fun nod to our history, and Matt and David’s Angel Fund. I was like, let’s just go vanilla. Both of our wives were like, guys, this is supposed to be fun. You should just call it Kindergarten. Hence the [...].

Adam: Very endearing name. Having two kids in kindergarten is a pretty special time of life. Anyway, glad to have you guys on board.

David: We’re so excited. Let’s just dive in. Braintrust is one of the first—and certainly the first at-scale that I know of—user-owned marketplace, built on the blockchain, and enabled with crypto. I think this is fascinating because I remember, for years being a “marketplace investor,” people talking about this and this being an idea, I’m thinking that’s great. That actually happened and here it is. Maybe just start, can you define what a user-owned marketplace is?

Adam: Yeah. I’ll rewind for a little bit of context to help explain why a user-owned marketplace might be a good thing and not a disaster. It’s too early to tell what this one will be, but so far, so good.

Web-enabled marketplaces were the big innovation of the 2000s–2010s. eBay’s probably the first one. We can create a trusted place to transact, connect buyers and sellers electronically—eBay and PayPal—then on to Yelp, and then the gig economy—Uber, DoorDash, et cetera.

The playbook there really has been to develop the software, raise tons of venture capital, to essentially subsidize one or both sides of that marketplace. Then if you’re lucky enough to break out and build liquidity, i.e., lots of buyers and sellers transacting…

David: Then you can jack up your take rate.

Adam: Yeah. Most never break out. Despite all the money raised, most never get there. If you’re lucky enough to get there, on the other end you’ve raised probably billions of dollars, and now it’s time to pay those investors back. And rightfully so. They were the risk capital. They should get a return.

Where’s that return coming from? The rake. So that marketplace operator, so for-profit corporation, and that for-profit corporation, they’re a fiduciary. Their whole reason to exist is to take as much of the transaction that they facilitate for themselves in a form of a fee as possible. What that does is it creates dramatically misaligned incentives.

David: I think it maybe is even a little worse than that, too. There’s the incentive to increase the take rate when you reach scale. I’m thinking about what Uber is doing right now. It’s not even just that. You’re also incentivized to jack up prices to the buy side because then you’re going to get a larger dollar amount as well.

Adam: Both, absolutely. If you’re taking 30% of the pie, you want to grow that pie and grow the 30%, so you definitely do both. There’s nothing wrong with that. That’s how the gig economy in these marketplaces have blown up into the giants they are, and I think they provided and created a lot of value in some cases, and in some cases I actually think they’ve been really just creative ways to make working class people work for even less money, and have absolutely no say in the governance of those networks, in those businesses.

There’s a spectrum of marketplaces that extract roughly as much value as they provide. I would put Airbnb probably on that end of the spectrum, so it’s kind of an even exchange. But Airbnb may even provide more value than it takes. Who knows? They have insurance, trust, safety, and blah-blah-blah. Then there’s the other end of the spectrum where they’re extracting so much disproportionate value that one or more sides of the marketplace will essentially do anything they can to get the hell off the marketplace.

Uber would be squarely in that bucket, maybe until recently. Prices have really gone up in the last few months on Uber, and now it’s basically unaffordable for most people to use Uber. Maybe it’s a luxury good now and maybe that’s more of I’ve heard of Uber drivers making $40–$50 an hour, which is awesome; it’s what they deserve, but—

David: Or closer to home for you, certainly Upwork, Fiverr does like if I remember, those take rates are quite high.

Adam: 25%, 40%, 45%, and just going up. If you listen to their earnings calls, they did talk about how they’re like, yeah, we’re going to keep increasing the rake.

What that does is it creates this misaligned incentive structure between the folks who make their living on that marketplace and the operator itself. And because the operator is a for-profit company, they must continue to grow, grow, grow.

I’m sort of an engineer-turned-entrepreneur, I’ve been in Silicon Valley 16–17 years—it sounds terrible when you say it out loud—and I’ve been as much a part of the problem here as anybody. Have built marketplaces in ecommerce, automotive, healthcare, and now talent, and invested in dozens more.

I realized a few years ago there’s got to be a better way to organize these things. The users who make their living on the marketplace, instead of ultimately becoming enemies of the marketplace operator, can instead be owners and part of the control. You keep incentives alike. To be fair, if Uber were going to do that when it started, Uber couldn’t give stock to 10 million drivers in 40 countries. It just doesn’t work that way. But you can spread control of something globally with a blockchain-based token.

I really got into blockchain in 2016. I was like, you know? Bitcoin’s great. It’s awesome.  Hopefully, that’s the new hard currency that will replace gold, but okay, own Bitcoin, great. Buy more whenever you can, there’s not much more to it.

David: What else is there to do here?

Adam: What is there to do? Just buy more of it. Don’t sell it. Okay, great. Anything else? Not really. Ethereum, though, is interesting. You’ve got a [...] and complete platform where you can create smart contracts that can represent any rules you want. Then you can create this network and have the participants in the network control it.

I was a full-time investor at the time I came up with this. I was a part of a firm called Cambrian that I helped co-found. This was an investment thesis looking for a team, and there’s just no one really doing it. We thought, you know what? This whole idea of user-owned networks, growing faster and being more valuable to their users, is a big idea. Why don’t we just stand one up and just prove it?

We picked what of the time sounded like an easy category—matching talent with clients. Tech talent, specifically, with big clients. We wrote the paper for it and incubated Braintrust out of Cambrian. It sounded really easy; here, three years later barely catching our breath. That’s kind of the big idea there. To be clear, the marketplace now in this new world we call Web 3.0—you’ll hear that term a lot—

Ben: How long have you been saying Web 3.0, by the way? The term seems to have originated out of nowhere.

Adam: Not long. I definitely didn’t invent it, let me be clear about that. Jesse Walden from Variant—Jesse’s an early backer of Braintrust—we’ve been saying user-owned for a long time. Now, the confusion there (of course) is ownership implies some right to profit or some dividend or whatever.

That’s not what this is about. These networks are actually non-profits. Like Ethereum. Ethereum is a non-profit. Ethereum got its incentive system right where ETH is used to pay miners and there’s an ecosystem there that makes Ethereum work in a permissionless way.

That’s how Braintrust is set up, too. That’s how a lot of these other user-owned networks are. It’s important to distinguish our model between something like a profit return mechanism where protocol gets a bunch of returns from somewhere and then distributes them to token holders.

That’s the antithesis of what we’re doing here. Our idea is to create software that can replace a middle man that’s extracting disproportionate value today—like in Upwork or Fiverr, whatever—take that value that’s currently being extracted, and just give it back to the users in the form of low fees.

That’s where the rubber meets the road here. Instead of taking 25%, 30%, 40% of every transaction as a rake, we take 0% from talent. If you feel like you should make $150 an hour as an engineer, put that up there. You’ll be in the marketplace there, and then we take a 10% flat fee from clients. Basically, whoever brings the client onto the platform—we call them nodes—Braintrust basically gets that 10% fee, and it’s meant to cover whatever costs you incur on bringing an enterprise client on.

Ben: So Braintrust (the company) doesn’t get that 10% in the form of revenue. It goes to the node that brought the client online?

Adam: Exactly right. Even further, there actually is no Braintrust company. Braintrust is literally just smart contracts on Ethereum. There’s no Braintrust Inc. just like there’s no Ethereum Inc. You have a consensus, which Joe Lubin owns. You have the Ethereum Foundation, which is a non-profit that helps build tooling for Ethereum.

We have similar things. We have actually six core teams that, from the start in 2018–2019, got together to really just build this. Our little core team called Freelance Labs actually has no engineers. I’m the only engineer and not even a very good one. We have our community, does all the coding and that kind of stuff. We kind of started off decentralized so we wouldn’t have to contort ourselves later.

Ben: I’m very interested in how you structure these types of things because everyone’s doing it a little bit differently and there seems to be a discovery right now, like a market discovery that’s almost like price discovery on what the best structure is for these types of companies. It’s a total wild west and it’s fun.

But before that, I want to go back to the centralized world just for a minute. Have you ever seen someone do it well, where they have a 100-year view of their company, they’re thinking, you know what? I’m going to create a lot of surplus of goodwill out in the marketplace for both supply side and demand side, and keep the fees really low because I actually believe that is the way to fill my fiduciary responsibility of creating the greatest long-term value for my shareholders?

Adam: Only one.

Ben: Who’s that?

Adam: Craigslist.

David: Interesting. I thought you were going to say Amazon, but…

Adam: Oh, no. Amazon is so predatory. The way they channel conflict is totally insane.

David: That is really bad, yeah.

Adam: I had no problem with Amazon until that. It got proven, they got subpoenaed, Congress, all the lying.

David: We had Brad Stone on after Amazon Unbound came out.

Adam: Brad broke it.

David: Totally.

Adam: I love Brad. He’s an amazing journalist.

David: He’s the best.

Adam: I loved Amazon until they were proven. They lied to Congress about not doing it. Apparently, anyone can do now. I say Craigslist because Craig Newmark is the only person I’ve ever met, Ben, who would fulfill the first part of your question of, hey, this is the hundred-year view, because he was disrupting newspapers. Many newspapers were horse and gig companies; the ultimate chokehold on marketplaces and information.

David: Newspapers used to be the best businesses in America. These companies had local monopolies and they would just churn out 70% EBITDA margins every year, just cash flowing geysers.

Adam: Go to Hearst Castle. Newspapers built that place.

David: Citizen Kane?

Adam: Yeah. Craig’s ethos was only charging one category, that’s tech jobs in San Francisco. Hope you remember. You can post a tech job in New York for free. It was $75 opposed to tech jobs in San Francisco. All the other categories are free and that’s how we build those amazing network effects. I think he’s a self-proclaimed socialist, too. He was not in it for profit. He would never sell it. He was not in this to maximize revenue. That’s why he always stayed private. He could only stay private. But if you have a publicly-traded company in the middle of a marketplace, there’s no question what its motives are.

The only other one that’s worth a mention here is Chesky with Airbnb. Obviously a public company, but they’ve had their moments like we all do where we make the wrong decision. But in that marketplace, you don’t hear about owners doing anything they can to get away from Airbnb. When COVID hit and all these things had to be cancelled, Brian went to the balance sheet and paid those owners off, and made them whole, rather. There’s a lot of good culture that comes in.

I think that’s one of the marketplaces that extracts as much value as it gives back or gives back more, and therefore I think will be one of the last to be disrupted by Web 3.0. Whereas, these food delivery networks are totally insane. These things push restaurants into negative margins on their menu items, they abuse the dashers. In 2019 DoorDash collected millions and millions of dollars of tips, book them as revenue, and stole them from—

David: Oh, yeah. That was bad.

Adam: Remember that?

David: That was really bad. We covered that in the episode.

Adam: It’s morally reprehensible and frankly just bad for business. These kinds of extractionary networks that really just punish the working class unnecessarily will be replaced by user-owned networks. It’s just a matter of time.

Ben: A lot of these remarks are on the line of incendiary. It’s not incendiary, but the way that you’re positioning is you’re taking a very significant stance that all these other marketplaces are effectively abuses of power, at least abuses of the people that took a chance on them to join their system, and there has to be a better way. Have you sort of always felt this way? I think you’re a several-time marketplace entrepreneur. Or has this been this new realization for you?

Adam: I’ve always felt that if something is good for business but your customers hate you, there’s opportunity there for competition. Now I get called a socialist—somebody from Bloomberg called me a socialist—are you [...] crazy? I've been making money my whole life. I’m a red-blooded, red meat entrepreneur. I help start a hedge fund. I am not a socialist.

When marketplace operators or any company is abusive to their customers, to the point where the customers are trying to pass laws to change, I think there’s opportunity. I don’t believe in the government regulating those things. I think the AB5 here in California was a completely unwell thought-out, corrupt horse [...]—just like everything else the state does—but these are market-created problems that markets can solve.

If you operate a marketplace and half your customers hate you, that’s an entrepreneur’s dream. The dream here is new technology—blockchain—powering a new organization model—user-owned, user-controlled—eats away at these central rent seekers who are just disproportionately extracting value.

Without blockchain, there’s no way to compete with these guys. There’s no one more operationally excellent than DoorDash. You have to really tip your hat to them. It’s an amazing app, incredibly well-run business.

David: And Uber, and Amazon, and all, yeah.

Adam: All of them. If you’re being abusive to a major part of their marketplace, then the door’s open for disruption.

David: I’m ashamed that I didn’t also think of Craig Newmark as the one example, but he was and is such a black sheep. He’s an avowed socialists. That’s why craigslist was built the way it was and still runs the way it does.

I feel like everybody in Silicon Valley just kind of looked at craigslist like, huh, okay, well that’s interesting but I don’t know what to do with that. But now, with blockchain there is this other way. I’m wondering, can we specifically talk through on Braintrust how the economics work and why this problem gets solved with them?

Adam: Absolutely. User-owned networks, Web 3.0, Braintrust, is all about keeping incentives aligned through making sure the folks that want control, that care about the rules of the network, have control and have earned it in a fair way. I’ll talk about what that means on Braintrust.

The Braintrust token is a governance token before it’s compound—they built a great governance system—and is one token, one vote. The only way to get the Braintrust token is to help build Braintrust. We did sell a small portion, around 20% to early backers—Kindergarten included.

David: To your point about traditional marketplaces, Web 2.0 marketplaces raise tons and tons of money, how much money did you raise in total? It was not a lot, right?

Adam: We raised $30 million. We have $25 million of it left. We have six core teams that represent maybe 30 individuals, that kind of do this for their full-time job, and then we have tens of thousands of community contributors that are contributing in some small or larger way. Outside of this small amount we’ve sold, the only way to get the token is to help build the network.

That could be dozens of things. It could mean writing copy for us, building UI, committing code, writing a smart contract, or auditing smart contracts; all the things. More importantly, sort of more scalable, it means what are the two most important parts of a two-sided marketplace? Referring and curating supply, generating an onboarding demand.

In the Braintrust world, that is referred talent. Help screen those talents. Make sure they’re not spammers and whatever, and criminals or whatever. On the demand side, bring Nike over. Help onboard Nike. Nike’s not going to self-serve. Goldman Sachs, a huge client of Braintrust. Bring Goldman Sachs on. These are our clients, actually, who were brought in from community members, and will be rewarded.

David: It’s a decentralized sales organization, essentially.

Adam: That’s 100% what it is. Now, let me be clear. We didn’t go 0%–100% totally decentralized, so I hired a couple sales guys, which we still have, but we three of them, and we have hundreds of what we call connectors who are just spokes that come in and make introductions.

Here’s the way the economics work. Let’s say, David, you come in as a skilled Java developer. You create your profile on Braintrust and then you land a gig with Goldman Sachs. I’m using this example specifically because Goldman has an insatiable demand for Java developers, so if you’re out there listening and you’re a good Java developer, come to Braintrust and work for Goldman Sachs. You can do it remotely, it’s amazing, and they pay well.

David: And—quick sidebar—you can do it remotely, they pay well, and you can also work for other people too at the same time, which is amazing.

Adam: That’s the whole point. Work when you want to, from where you want to, get 100% of your market rate, and do it whenever you want. If you want to work six months and travel six months, we’re your place to do that. Good luck doing that in Google.

David: Or Upwork.

Adam: Or anywhere else.

Ben: Also, I can’t let you get away with making 100%. Make 90%. Ultimately, even if you’re taking a 10% fee from the buy side, it’s still 10% of what the buyer’s budget is to accomplish this task.

Adam: The buyer’s budget is set by what the supplier’s rate is. I promise you I’m going to checkmate this one, so get ready.

Ben: I imagined you’ve thought about this.

Adam: I get the question all the time. It’s a fair one, but let’s say David’s rate is $150 an hour. That’s just my rate and I want $150 an hour. Upwork’s going to take whatever—30%, 25%, 40%—the rate is. At Braintrust, David gets his $150, but then another $15 is tacked on and paid by the client.

Ben: Sure, but that means the client’s willingness to pay was $165.

Adam: Well, then David should have changed his rate to $165, and then they’ll be paying…

Ben: Look, I’m not saying it’s not deserved. There is a literal economic value in matching supply to demand which is the whole thesis of the company, but you are entitled to a cut of what the total customer’s willingness to pay is by providing that service.

Adam: Absolutely right. Look, we got to keep the lights on, right? No one’s getting rich off the 10%. It’s meant for whichever node brought the business to the network.

David: That’s the other thing, too, is that’s a little bit of a wrinkle here, too. I don’t know [...]. You are totally right. Goldman is paying more than $150 an hour for this, but most of that incremental money is not going to Braintrust, right?

Adam: Remember, Braintrust is just a smart contract. It goes to whoever brought Goldman in. It pays whoever onboarded Goldman. Whoever referred Goldman, ultimately, is probably going to be compensated somehow through that 10%. That’s something that’s being discussed right now.

These things don’t form themselves, so there is some cost there. That’s where that 10% landed in. And who knows? Maybe the community will decide someday, maybe it should be 5%, maybe it should be 11%. But we do try to lead with, look, if David says his rate’s $150 and that’s what he wants to earn, then that’s what the marketplace will represent him to clients willing to pay. Different story. It’s a fair point then, but the money is taken from the supply side and other networks, though.

Ben: You’re coming at it from a very pragmatic angle of operating the system. I’m coming at it from a theoretical macroeconomic perspective.

Adam: Yeah, and you’re absolutely right. David gets the gig—let’s see—bills out $150,000. He invoice through our system through Braintrust. Goldman then gets two invoices: one for $150,000—it’s all done in USD; we haven’t touched a token yet. That $150,000 is paid however Goldman wants to pay, usually US dollar, wire transfer, goes through whatever node brought their business to the network, and then David gets an ACH for $150,000. It might be $149,998 or whatever you might pay $1 ACH fee or whatever, but there’s no network fee.

David: Those ACH fees…

Adam: ACH fees, they’ll get you. Then, the second invoice Goldman gets is for 10%, so $15,000, and that $15,000 goes to the node. Now, there is some discussion on the platform. This is kind of early, nothing’s been voted on yet. In our governance forums, there’s been some discussion around maybe some of those fees should be paid in the Braintrust token so when whoever referred Goldman gets paid her reward and whoever referred David gets paid her reward in Braintrust tokens.

Today, those come out of the treasury. In the future, that could deplete the treasury. So maybe there should be some recycle function there where clients should have to pay some in token, so that tokens recycle. That’s something that is being debated and probably will be voted on by the community. That's token economics.

So, David gets his full rate. He’s going to get some tokens, usually as a reward for being a good citizen, like hey David, you got your first invoice paid from Goldman. Congrats, here’s 100 tokens or whatever it is. Then you use those tokens to vote and propose new changes, or vote yes on changes or vote no on changes.

The governance thesis is always funny because skeptics will say, well, nobody votes their Facebook shares. It sure would matter if they did because only one guy’s vote matters over there. That’s true and look where that got us.

I would say I go back to the DoorDash example. Voting matters when you make your living on that network. At the end of 2019 when the CEO of DoorDash said, you know what? We’re going to steal those tips and book them as revenue. You can’t do that in Braintrust. He would have had to propose it to the community. Can we steal your tips, yes or no? You have 72 hours.

That’s the great thing about these user-owned Web 3.0 networks. The rules, the finances, the fees we charge are written in the smart contracts, and those smart contracts can only be upgraded by the community.

David: Let’s go back to the transaction for a minute. There is also this element of—I don’t know what the right word is—an anti take rate, in that new tokens are getting created and distributed to the participants in these transactions. As of today, as of right now when we’re recording, one Braintrust token is currently trading for about $10 a token, so they have value. How do you think about that?

There’s the economics of the pure transaction itself—the rate that my $150 an hour rate that I set, then the $165 that Goldman pays, and the node getting the difference and all that. But there’s also this other element here, too, where value is being dispersed to participants in the ecosystem.

Adam: This network was designed to make the token valuable because of its usefulness on the network. The primary usefulness is governance—proposing, voting yes, voting no. There are other features like bidstaking where you can actually stake some tokens along with a bid.

Let’s say you were bidding along 10 other people in that Goldman example, and you’re like, you know what? I’m definitely going to be the best person for this job. I’ll stake a thousand tokens along with my bid. That will signal to Goldman that if I’m a no-show bad actor, I’ll lose those tokens. They’re going to escrow. It’s like putting skin in the game.

Now the 10 bidders, Goldman’s probably going to only look at people staking. They say, oh, you got skin in the game. I’ll interview you first. Of course you show up, you’re a good actor, you get your tokens back. You just used those tokens to build your freelancing business and build it faster and better.

That’s just one example. There are other kind of creative uses for the token that are in development. The tokens are meant to be useful on the platform. It’s not meant to just be sold. If there were no cash value ever for the token, it wouldn’t affect the utility of our network token.

Ben: It’s kind of a wild concept. It’s almost as if every employment agreement had a break-up fee associated with it, like an employee-side break-up fee, where you’re saying, I want to work here so bad that if it doesn’t work out, not only do I stop working here but it’s also like a reverse signing bonus.

Adam: And the opposite. Here’s what I think is cool about being able to dynamically build these incentives or disincentives systems using the token. We’re now in a talent-constrained environment. It’s actually the opposite of what I just said is actually normally happening. The client can’t get enough applicants.

What we’re actually going to release first, which has tested really well with the community, is what we call client staking, where the client will actually put up a number—say a thousand tokens—and say, we’re giving these away and we’ll divide them equally among all qualified applicants whether you get the job or not.

David: So to attract applicants.

Adam: To attract applicants. It’s a signing bonus before you even sign, with the goal being not get someone signed because that’s not their obvious rewards there. It takes an hour, an hour-and-a-half to propose a thoughtful proposal. In a talent-constrained environment, why not compensate people for that? Obviously, the community thinks that’s a wildly great idea, so that’s implementing as well.

What’s more interesting here is tokens are a good way to incentivize filling whichever side of your marketplace is more constrained. We have this referral engine right now. I’ll say it’s not the most sophisticated thing in the world, but we’re getting there. The referral engine pays tokens for anytime someone you refer starts transacting.

Back to David and Goldman, let’s say Ben referred David. As soon as David gets an invoice, 1% of that $150,000 is going to be kicked out to Ben in the form of Braintrust tokens, to reward Ben for bringing this valuable David Java developer to the network.

David: This is what I was getting at. It’s not that 1%. I, David, don’t lose that. I get my $150. It’s in the then current equivalent value of Braintrust tokens, on top of it that Ben then gets.

Adam: That’s exactly right.

David: This is like an anti-take rate. You’re inflating the system—I don’t mean that in a bad way—with every transaction that happens.

Adam: A lot of marketplaces have this incentive to disintermediate, like hey, I stay in Ben’s beach house on VRBO, and hey Ben next time, I’ll just call you so we can not pay the 30%. It’s the opposite here. If you just intermediate you’re going to make less money. You’re going to have less upside. So the more you participate on platform and be a good citizen, the more token rewards you’re getting.

It’s not meant to be a cash reward—it might have cash value, it might not—it’s meant to be, okay, now you have more control over the network. Now, I know you can build your business faster because you could stake tokens along with your bids. It’s meant to be a virtuous economy that way.

Ben: Just a quick meta point. It’s interesting how some of this or a lot of this to be possible in USD, like setting up these incentives, or perhaps profit share grants, or options, or something like that, but until crypto, people didn’t experiment nearly this much with marketplace incentives, labor incentives. It seems like in moving to a token-based world instead of a pure USD- and stock-denominated world, it’s enabled a new wave of creativity, of people willing to play with incentives that we haven’t seen in a long time.

Adam: I totally agree. That is why I’ve changed my career in the last five years to just do this full-time. It’s also why we named the firm Cambrian. When this Cambrian explosion of creativity here powered by this new technology which is what blockchains are programmable money. Ethereum is, at least. You can code in all these incentives and all these rules.

For us, there are many talent networks that don’t involve the token, but they’re for-profit and they automatically pick the marketplace operator against the participants, hence this tug of war and its misalignment of incentives. Without blockchain, you couldn’t have made this public good. Braintrust is a non-profit. It’s a protocol. It’s a set of smart contracts that helps people find work.

If Uniswap is a protocol for matching buyers and sellers of tokens, and Compound is a protocol for matching borrowers and lenders of money, Braintrust is a protocol for matching labor with demand for labor.

Ben: Can you walk us through how it works? You raised $30 million, you’ve got these 6 teams, and there’s no company. Can you give us a little bit more color on what the infrastructure looks like for people to get paid for doing work? How do you spend that $30 million and how did it literally flow into what?

Adam: They were sold as SAFTs—Simple Agreement for Future Tokens—and then on September 1st of this year, those SAFTs converted into actual ERC-20 tokens. The investors have a two-year lockup before they can access those one-year cliff. Where did that money go? It went to the core teams. It went in as cash (obviously) to the core teams, and that’s how we bootstrap the network.

Ben: Are those teams C-Corps?

Adam: Yes. Generally C-Corps and LLC.

Ben: Then each of the teams own a certain number of tokens to start, which they then exchange for the dollars so with that $30 million could proportionally flow into the teams in a way?

Adam: Exactly right.

Ben: Fascinating.

Adam: As complex as that sounds, that’s the simplest way to do this. A lot of startups would be like, okay, well we have our Delaware C here and that’s going to be XYZ Protocol Inc. Then we have the XYZ protocol which you can buy tokens in, so we’re selling equity and tokens, and who knows how they’ll convert together, and see you in court.

David: It does seem like your version and basically Solana has a very similar setup. It’s kind of coalescing as the standard.

Adam: The way I look at it is, if you have a good idea but have no idea how your token will work, sell equity not tokens. If you have a great idea and you’re pretty sure how the token can and will work, sell tokens no equity. Never do both. Or do neither. That’s fine, too. But doing both makes it really confusing. What it’s going to end up doing is pitting token holders against equity holders no matter what.

Ben: Right. You have two competing incentives at that point, whereas at this point, at least everybody’s incentivized for the same thing to go up.

Adam: We’re all in the same instrument here. Its founders, the six core teams, our tens of thousands in the community, purchasers, they’re all the same instrument and it keeps incentives aligned.

Ben: Why six teams distributed through six different entities instead of six teams in one entity called the company?

Adam: There’s no playbook there. It’s just how it came together. I’m with a company called Freelance Labs, which is one of the originators. There’s a group of really sharp enterprise sales guys. It’s three of them that just know how to bring the Goldmans and Nikes to the table, and they have their own company.

Ben: I see. And these companies preexist or predate the existing [...] trust.

Adam: Mostly. It’s a group of people that are like, hey we could all form a new company, and just for the sake of forming Braintrust. But why? Because Braintrust isn’t a company, so why have a central company behind it? Why not just have it be built by the people who want to use it?

David: That’s so great. It’s Packy’s liquid super teams. It’s happening. Now that the network is live and there are $30-ish million annualized GMV going through the platform, for development of Braintrust, are you just recruiting on Braintrust? When does this become a recursive function?

Adam: It was recursive from day one. Freelance Labs is one of the biggest clients on Braintrust. Happily, I think Nestle passed us. You want to eat your own dog food, but you don’t want to be the fattest dog eating your own dog food. Every line of code in [...] that has gone to developing the Braintrust ecosystem has been a job on Braintrust. There’s been dozens or maybe 100 now of individual contributors or teams of people.

We have a couple of blockchain teams that come in and pitch in on things. Those have all been done either for cash or tokens or some mixture thereof. But yeah, they’re all jobs on Braintrust. If we could make that work, we would have stopped.

David: Right. That’s sort of like you should at least be able to do that. This is a great transition. To my mind, there are two really big ideas here embodied in the Braintrust of Braintrust. One is everything we’ve just been talking about. A user-owned marketplace is made better way to say it now, has the lingo and evolved this native Web 3.0 marketplace looks like. Two, though, is the application, Braintrust itself and what it is enabling, which I alluded to a little bit earlier but I want to spend some time diving into this.

Okay, you’re a really talented Java developer. You could probably go work at any company you want right now, in a traditional, either be employed, get W-2, have your benefits, blah-blah-blah, get your paid time off. Or post-COVID now, why would you want to do that? And this is really a platform. If you’re a very talented developer, tech talent, whatever, your work is liquid. You can work for multiple companies at once on your own terms, on your own time. To my mind, this is kind of the platform that enables that at scale, right?

Adam: Absolutely. Braintrust got very lucky, I would say, in a couple of kind of mega trends that made this thing basically able to grow to the scale it already has, essentially with spending no money, or spent $5 million or something over the last 3 years. Those are a couple of things.

I have a couple of funny stories I could share that will elucidate this. When Gabe (my co-founder) and I started, and he and I know enterprise sales, like we just pick the first five clients out of our backyard. This will be easy. This is pre-COVID, this is Fall of 2019. We pitched this like, hey, we’re a user-owned marketplace, we have the best talent, and you can get them at this very low 10% markup.

A company—we won’t name them, but they’re now existing clients—would say, that’s cool. Can you fly them to our office and we pay $10,000 for relocation?

David: That’s not the point.

Adam: That’s not the point. The point is remote distributed engineering teams. They’re like, yeah, I’m sure someday people will do that, but until then you’re coming to Portland, St. Louis, whatever. We’re just like [...]. How are we going to get this working?

Then COVID hits, and all those folks called back. They’re like, hey, are you guys still doing this? We’ve been locked out of our offices now. This is kind of like the command consensus says it’s okay, so we’re cool with it. So that anachronistic US enterprise thing of butts in seats, it just evaporated overnight in March and April of 2020.

So that was tailwind number one that really juiced this thing. And then number two, which is we’re living through right now, which is, David, exactly kind of what you’re alluding to, is they’re calling the great resignation, or we’ve been calling it the unbundling of corporate America. It’s exactly what you described. Why would I tredge to a cube farm and work on stuff I don’t really want to work on…

David: Virtual or otherwise, even if it’s a virtual cube farm.

Adam: Totally, and then do a bunch of stuff that only maybe a tenth of that I want to do, when I can peel out and specialize, have autonomy, and what nobody knows, yeah, let’s make more money. That’s the real thing everyone’s realizing. So it’s the unbundling of corporate America where people get to specialize. They get to work on their own terms, set their own rates, from where they want, when they want.

Now the communication tools are so good, there’s Asana, Google Docs, blah-blah-blah. What we were missing is the piece that brings you the money—the chops. Look, I think Fiverr and Upwork were valiant efforts in that direction. Our hats off to them for helping create a space for this.

Braintrust is the no-take-rate way of doing it, eliminates this need to go pitch yourself and all these things that make freelancing annoying. You could just come into Braintrust and hopefully find a steady stream of work when you want it.

Ben: And your go-to market has been wildly different than those other companies. I mean the dollar per hour. I don’t know the right way to represent this, but the cost of the labor that you’re starting with on a Braintrust is some of the most high-paying jobs in the world, especially in software engineering.

I’m curious. How did you think about attacking the market sort of from the top rather than from what seems to be the most atomizable work, which is what has been done in the past?

Adam: It’s a great point, Ben. It’s something I’m really passionate about. You heard me speaking earlier about my general disdain for the gig economy. See, all the gig economy did was figure out how to make someone who should be earning $15 an hour work for $5 an hour, buy their own gas and all. I come from a family of that era, who would make money that way. It just sickens me that that’s the main innovation of the gig economy.

I really wanted to start there, honestly, in 2018. I wanted to build a user-owned driver network. It was just too much. I expected out. I was like, first of all, if you’re using a token to incentivize someone to be a participant of your network. You explain what the hell a token is. That’s hard to do now. It was impossible in 2018. I’m like, okay well we’ll start with the dorks like me who do software for a living.

David: Software engineers are going to be the most receptive population to this, yeah.

Adam: It was the lowest hanging fruit, honest to God, and not that interesting of a category. Take it from me. I’ve been a freelance software engineer my whole career and I’ve hired many of them. The field bores me to death, too, but it’s an important place to prove it out. It was important for us to prove that this stuff works and that the incentive systems can work.

Now, we kind of obfuscated the token out of it a little bit. We’ve got a long way to go, but it’s my greatest hope that someone will copy this and implement it in the real world—your food delivery people, delivery business, you taking lessons hopefully from what we’ve learned. But, yeah, to answer your question, that was just the easiest place to start.

David: The beginning of COVID and then even still to this day, these new stories come out about an engineer working both at Google and Facebook, secretly working two jobs, three jobs, and whatnot. There was a whole Wall Street Journal article about a couple of months ago that was great; it was hilarious.

One way to look at that, I think 99% of the world probably did, was like, oh wow, this is crazy. Good for those guys, that’s funny. The other way to look at it, which Braintrust has done this is clearly people want to do this. There’s an opportunity here. Ernie, who’s the CEO over, used to talk about this all the time. There’s a shadow market. There is a shadow market of people; they were doing this before. How do you bring the shadow market into light and just enable it in the light for everybody? That feels like the huge idea here.

Adam: The biggest problem I had with that article was the tone was so accusatory and looking down on the labor. The guy who had three jobs or whatever. He’s making probably a million dollars a year.

David: It’s like you take a step back. What the F is wrong with that? Why is that bad?

Adam: Whose fault is that, number one? Is it because those big companies don’t know how to manage people, have massive bloated payrolls, and no one actually does anything at those tech companies? Is that possible? Is it possible that you could lay off 80% of people in Silicon Valley, and those ATM machine companies would continue to roll on? Is that possible?

David: That is 100% unarguably the case.

Adam: Right. So some clever person figured out how to get a job at all three of them and makes good money because it turns out you don’t actually have to work at those companies. To me, that’s way more of a testament to the waste and inefficiency in corporate America. But to your point, more interestingly, yeah shadow markets. Let people work how, when, and the way they want to, and everyone’s going to win.

This is better for clients, too. We’re never saying the client wins, but Porsche opened the design and an R&D tech studio in (I think) Sunnyvale. They came to us and they’re like, we can’t get anyone to come here. This is pre-COVID. I was like, that’s crazy. I would quit doing this to go work for Porsche. They’re like, yeah, we just can’t get people to come here and it’s been really tough. Then COVID hit and they’re like, okay, now it be remote. They have this huge Sunnyvale presence so they can have people in Poland committing code for them.

Then it turned out to be this huge lesson. I was like, oh man, this is such a better model. They’re now really thriving clients and most importantly they’re getting this important software built. This isn’t like building a marketing site. It’s not the best, not important, but they’re building—

David: This is like software going in the dash…

Adam: In the car, yeah. So Porche is really happy. They’re paying market rates for it with no markup. It’s not like the Deloitte, PwC, and the big firms markup. Now, they don’t have to worry about this footprint, Sunnyvale. It’s a winnable site.

David: Thinking about this more from the labor side—we won’t use Porsche because Porsche actually is awesome and I agree; it would be fun to work there—let’s take Pontiac or something. I don’t even know if that brand exists anymore.

Adam: They sunset it 15 years ago but it’s a good example.

David: Okay, this is a good example then. If I’m an ambitious software engineer who wants to do work on cars, pre-Braintrust thinking this way, I had two options. I could go work at Pontiac, be miserable, and probably want to shoot myself every day; or I could go work at Tesla, it would be exciting, but I would be grinding to the bone. I prolly be getting some Tesla stock and that’s good, but then also a limited number of jobs that Tesla. I probably have to move to Silicon Valley and I have to do all this stuff.

Now, I can work on great software for cars, for lots of car companies, and make more money. Anyway, I don’t have to necessarily work at Tesla. Or I could work at Tesla and do this other stuff.

Adam: Yeah, it’s all about specialization. When people can just do what they want to do professionally, it’s a win for everyone. The output is going to be better, it’s going to be more fun, the quality’s going to be higher. Specialization unbundling is just a good thing here, generally.

Ben: Specialization is a pretty good way to dive into this. When someone becomes a software engineer at a company, they [...] on average about five years. I think there’s probably some interesting distribution where there’s tons of people staying too, less people but also lots of people staying [...]. The ambiguousness of the work to be done is extremely high when they joined and that’s okay because they’re deeply embedded for a long time.

Meanwhile on the complete opposite side of the spectrum, I go to Fiverr or 99designs, I pay $99, I get a logo designed, the scope of that work is extremely well-specified to my spec, and it’s extremely short-term. I’m curious where you’re seeing the most common examples on Braintrust since it is in software engineering. Is it like ‘come be embedded in my team, dream up the features and code them, and it’s going to last probably six months to a year’? Or is it more like ‘we kind of know what we need to do and you need to come build it’?

Adam:It’s both. There’s a lot of both. The good part about that is a lot of people want both things, want one or the other, even though whoever’s listening might think, oh I’m definitely the second camp or whatever, first camp. There’s a shocking amount of people who want one or the other.

Fortunately, there are both opportunities there. They’re very finite project-based things. It’s like, look, once this thing gets built we’re probably not going to need you anymore, and good to go. So count on six months or whatever.

Then there are other things where, like TaskRabbit’s a big client and they’re like, hey, come help us build TaskRabbit here at Ikea forever and ever and ever. As long as you want to help us, we’ll have things for you to do. There’s 1099 opportunity, we do W-2, there are no [...] tax classification—

David: Oh you do W-2?

Adam: Absolutely. We support all that stuff because some companies require it. There are some states that have really strict laws around that, so our job is to help everyone be compliant with whatever local regulations they have. We do all that.

David: I can totally see people wanting different things at different life stages, too. I’m desperate where I’m going to do three projects at once that are tightly scoped, and then I’m going to do a year where it’s more stable.

Adam: You have people signing off. They’re like, hey, I’ll be gone for three months. Don’t ping me. That’s awesome. Braintrust will always be here and they can come back whenever they want.

Ben: I have to ask you the question—it’s one of my favorite diligence questions whenever I’m looking at investing in a company, because it always helps suss out how the founder thinks about the world—how could this go catastrophically wrong? How could the world rearrange itself such that you’re like, damn, it was looking good, but now this is not the right—

David: Did you steal this from Mobison with the…

Ben: No, absolutely not.

David: He was saying the pre-mortem is one of the high quality decision-making tactics.

Ben: Oh. No. I use this to help me write my own [...] most about their companies.

David: Maybe Mobison stole it from you.

Ben: Adam, write the risks section of the investment memo in this company, in this non-profit.

Adam: Yeah, in this decentralized network. Well, three years ago the list was two miles long, then two years ago it was one mile long, and now it’s much shorter, mainly because it’s taken a life of its own. There are tens of thousands of people now who care deeply about this working because it’s money for them, it’s livelihood.

Fortunately, the core teams here are never going to go away, but we can finally step back and really let the community. We’re seeing this in our governance forums. It’s almost a little chaotic, which is a good thing. Existentially, I don’t know if Sam Altman figures out the AI and all these jobs get wiped out. You don’t need developers anymore because the computers will write the code—

Ben: CodePilot got really good. It’s just pilot.

Adam: Yeah. And look, that’ll happen. But humans will figure out other things to do, and hopefully those other things will be categories on Braintrust. I think we’ve gone past existential threats at this point.

We built this thing. It wasn’t some get rich scheme or selling tokens to make money to the general public. This is built by talent that want to build their freelance businesses, for talent that want to build their freelance business. And the clients obviously love it too. Hopefully, it’s been de-risked.

David: Obviously, a major milestone was the listing of the token about a month ago. How did the listing impact things? You listed on Coinbase. Another exchange [...] or Coinbase?

Adam: Coinbase is the largest. There are a handful of decentralized exchanges that picked up the token as well—Uniswap, 1inch I believe, and some other ones I’ve never heard of. A couple of things. The cash value of our token is literally, technically meaningless to the protocol. The token has utility on the network, the users that have the token so far, and here’s the proof for this. We got tens of thousands of people to participate in this token economy when the token was on Ropsten. No cash value on testnet. Literally no value. The price $0. It’s just a token. One BTRST.

We even got this question for you skeptics. How the hell do you build a tokenized network for three years with no main net token? Well because the model works. The model makes sense. Now that there is cash value, maybe there’s more incentive for people to come play, come make referrals and whatever, but it’s not important to us what the price is. We focus on making sure the community’s getting what it needs and building the features we want. We’re staying aligned with our needs, our community needs.

Ben: Just to clarify something. In part, that’s true because all your early mechanics that involved the token were governance-based not price-based, so it literally didn’t matter because only now you’re starting to integrate these features where you can sort of stay and you can promise pseudo-monetary rewards. Whereas before, it’s well do I want to be able to vote in the future of this thing, so that the take rate stays low on the work that I’m doing or the take rate stays $0? Yes, I do. And it was kind of binary.

Adam: Exactly right. That’s why we’ve seen very, very few community members sell anything on Coinbase, which is shocking to me. I’ll say the second piece. Incentives matter. Liquid incentives matter even more. We learned a couple of hard lessons as we got off the runway.

In September, one of them was someone in our community, built something called Braintrust Academy. It’s just one of the core teams. They just built this on their own. It’s a totally separate thing. The academy is meant to teach people how the ecosystem works, teach people how to bring more talent in or become a talent screener, or how tokens work, or it’s intro to crypto, that kind of stuff. It’s an ecosystem academy, and it would reward you for taking a course with whatever, 5 or 10 BTRST tokens or whatever. The point was to bring people into the tent, and then they would use those tokens to vote on new things.

It just never occurred to us. We just forgot that this thing was giving tokens out for watching a three-minute video. Then Coinbase came and, oh the bots. We got bot armies now and it’s a [...] disaster, honestly.

Ben: And to be super clear, this is because your token was worth $10, then it was worth $40-something. Will I go watch a video or will I spin up a bot farm to go watch a whole bunch of videos? Absolutely I will now.

Adam: Exactly. That is exactly what happened. That’s my new piece of advice. Be careful what you’re incentivizing because the whole world will show up. A lot of the [...] people came through and we’re happy to have them. The community grew from 50 to 700,000 in 7 days.

David: Wow. In terms of token holders?

Adam: Yeah, members of the community. People who are actually here. We’re thrilled to have them and mop up the other messes.

David: Right, because I guess before the listing, because when it was all testnet, the only theoretical holders were the staff’s holders and the founders, right?

Adam: No. We actually had thousands of token holders that were just holding Ropsten credits. Then on September 1st, we converted all those token holders into real token holders.

Ben: And for folks who don’t know, Ropsten is an Ethereum test network.

Adam: Sorry, yeah. That’s the Ethereum test network. It acts just like Ethereum, it’s a copy of Ethereum, but tokens on that network can’t be traded anywhere. They have no value. We have thousands of people that helped us build and were interested in the token because of its governance power, and didn’t care about its cash value. When that flight flips, the game changes on you, but it’s mostly positive stuff.

David: I’m sure there have been other companies, projects that have gone through a journey like this one so far in Web 3.0 and decentralized applications, but I think you have to be probably the biggest scale one to live through this sort of first in history, right?

Adam: I really have a lot of respect for Roneil over at Audius, how Audius is done.

David: Our previous LP guest. Episode came out right before this one.

Adam: He’s awesome. I haven’t listened to that one yet. He’s great. I got to meet him earlier this year and it was really impressive what they’ve built there. One of the reasons we sort of built a business first and then decentralized it is exactly that reason. There are a lot of clever innovators and young entrepreneurs in the space that have this great idea, they write a smart contract, they push it on-chain, and they’re like, all right I built it. Where are they?

David: Right, which is very different from a business.

Adam: Yeah, and especially a two-sided marketplace. It’s very, very hard to build liquidity in marketplaces. We wanted to bring real users. The amazing thing is we polled all of our users—it was maybe six months before the main net launch—have you ever owned a crypto token before? And the answers were, (a) yes, I own one right now; or (b) heard of it, never owned one; or (c) what’s a crypto token? Eighty-seven percent were (b) or (c).

Ninety percent of the folks coming into this ecosystem are brand new to crypto, and this is the first time that most of these clients on Braintrust have ever dealt with crypto, so bringing lots of new participants into this ecosystem is fun.

David: The clients have tokens as well.

Adam: Some do. Some want to earn tokens as connectors for making introductions, and have done that. Others are like, we don’t want anything to do with this token.

David: But that’s cool. Some portions of clients, like portions of Goldmans and Nestles out there are now being onboarded to crypto.

Adam: Absolutely, yeah. Absolutely right.

Ben: Well Adam, the last hour, hour-and-a-half has been super fun. I’m sure people will want to check out more about what you’re doing and go look for their next potential employment opportunity. Where should they go and where can they find you on the Internet?

Adam: braintrust.com is the marketplace. I’m on Twitter @adamjacksonsf.

Ben: Awesome.

David: Awesome.

Ben: LPs, thank you for joining us. Adam, thank you. This has been a blast.

Adam: So great to see you guys. Thanks for having me.

David: It’s great. We’ll see you all next time.

Ben: See you next time.

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