Crypto Companies Insider Ownership is Approaching that of Classic Startups
Tomasz TunguzVenture Capitalist at Redpoint If you were forwarded this newsletter, and you'd like to receive it in the future, subscribe here. Crypto Companies Insider Ownership is Approaching that of Classic Startups
Unlike equity-only startups, crypto startups maintain two capitalization tables. The first is the equity cap table, just the same as non-crypto startup. The second is the token cap table: who owns how many tokens. In the early days of crypto, the convention for the genesis token distribution[1] was 80/20 community/insiders. Employees, investors, and the foundations responsible for running the projects (insiders) retained 20% of the tokens. At IPO for a classic startup, equity allocation is the reverse. Insiders own 80%. Why this allocation? The predominant sentiment was well articulated in a 2020 Messari Report on the state of L1s:
The report continues. “Times have changed, and the ideal ratio is in flux.” Since the publication of the report, new projects have been increasing the insider share. Ethereum launched with 15% insider ownership almost 7 years ago. 4 years ago, TRON launched TRX at 26% and Tezos launched XTZ at 20%. The raft of L1s launching in the last 2 years have spanned 33% (DOT) to 48% (SOL). The most recent, FLOW is at 58% insider ownership. It’s important to note Flow is a child project of Dapper Labs with a different corporate structure than the others on the list. Regardless, the trend is broader than one business. Will insider ownership of crypto companies asymptote to a structure similar to post-IPO companies: insiders owning 80% on the day the IPO closes? Most companies sell about 20% at the IPO. The data suggests so. Are there any downstream effects? Let’s look at some select correlations for these tokens.
In short, fewer tokens circulate - logical since they are closely held. Second, insider ownership correlates to market cap, slightly. It would seem there’s no cap on upside with greater insider ownership. Most importantly, there’s zero correlation to last-twelve months' token performance, suggesting the market doesn’t act any differently. Should this continue, we should expect the token cap tables of crypto companies to approach those of classical startups. Are there broader implications? The Messari report continues:
I’m curious to dive deeper to understand whether developer activity is correlated to genesis tokenomics. So far, I haven’t seen much to support a reversal in this trend, which could make investing in crypto companies much more similar to equity rounds, and invite more capital into the ecosystem. With greater ownership available for insiders, employees and investors will reap greater rewards. For investors, greater ownership reduces the exit value we underwrite in our investments. Of course, this is at the expense of the community. Ultimately, the kernel of the question underpinning these allocation decisions is: how much of the token cap table does the community need/want to participate at scale? We’re testing our way to the answer, edging closer by the year. [1] the distribution of tokens on the day they are created. This changes as network participants contribute to the network and are rewarded. Also, different networks have inflationary and deflationary policies which may change token counts. |
Older messages
Height - The Project Management Tool for the Modern Worker
Wednesday, September 29, 2021
Tomasz Tunguz Venture Capitalist at Redpoint If you were forwarded this newsletter, and you'd like to receive it in the future, subscribe here. Height - The Project Management Tool for the Modern
The IMPACT Conference on the Modern Data Stack
Monday, September 27, 2021
Tomasz Tunguz Venture Capitalist at Redpoint If you were forwarded this newsletter, and you'd like to receive it in the future, subscribe here. The IMPACT Conference on the Modern Data Stack The
GitLab S-1 Analysis: How 7 Key Metrics Stack Up
Monday, September 20, 2021
Tomasz Tunguz Venture Capitalist at Redpoint If you were forwarded this newsletter, and you'd like to receive it in the future, subscribe here. GitLab S-1 Analysis: How 7 Key Metrics Stack Up
Scaling and Measuring an Effective Developer Relations Organization
Thursday, September 16, 2021
Tomasz Tunguz Venture Capitalist at Redpoint If you were forwarded this newsletter, and you'd like to receive it in the future, subscribe here. Scaling and Measuring an Effective Developer
What is the Product the Customer Buys Before They Buy Yours?
Tuesday, September 14, 2021
Tomasz Tunguz Venture Capitalist at Redpoint If you were forwarded this newsletter, and you'd like to receive it in the future, subscribe here. What is the Product the Customer Buys Before They
You Might Also Like
Peppered Kitty and The Penal Guard 💂♂️
Tuesday, November 12, 2024
The breed of the non-human͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏
🗞 What's New: HARO/Connectively is shutting down
Tuesday, November 12, 2024
Also: Use AI to beef up your security ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏
the wizard of oz.
Tuesday, November 12, 2024
Read time: 53 sec. Today I want to tell you about Cristiano. He was part of our last Starter Story Academy sprint. And during his first two weeks, he was busy designing and tweaking his landing page.
💃 Beyoncé loves her products...here’s how she did it
Tuesday, November 12, 2024
The exact steps to build your beauty brand empire Hey Friend , We just launched our newest course, How to Build a Million Dollar Beauty Brand. In it, for the first time, Alicia Scott—founder of Range
[CEI] Chrome Extension Ideas #166
Tuesday, November 12, 2024
ideas for Amazon, Twitter, Developers, and Students ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏
Navattic's PLG funnel with Natalie Marcotullio
Tuesday, November 12, 2024
In conversation with Navattic's Head of Growth about their product-led growth (PLG) funnel. ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏
You have one shot to sell your business 🤞
Tuesday, November 12, 2024
Just One Week to Go Until Exit Strategy Launches!
Product manager is an unfair role. So work unfairly.
Tuesday, November 12, 2024
How to thrive in “the great flattening” by redefining work norms ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏
Growth Newsletter #223
Tuesday, November 12, 2024
It's not "what" but "where" ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏
All stock, 6-figure deal
Tuesday, November 12, 2024
Plus, overcome a big barrier to exit planning: owner dependency ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏