Driving the Smart Cities of Tomorrow

A Conversation with Kaan Gunay, Co-Founder and CEO of Firefly

Tell us about Firefly. What is it? What are you offering?

In short, Firefly is a smart city media network. We connect people, governments and businesses to help build intelligent, safe and sustainable cities.


To do this, we leverage existing networks of rideshare vehicles and install our proprietary media displays atop their cars. These screens  deliver geo-targeted advertising based on driver routes and location, delivering the right message at the right time for highly effective campaign-engagement. By partnering directly with drivers we’ve been able to boost their income on average 20 percent.

In addition to the technology, what sets us apart is our community-first commitment. This manifests itself in different ways.  At least 10 percent of our entire advertising inventory at any given time is dedicated to local not-for-profit organizations, public sector PSAs and other non-commercial entities such as charities, advocacy groups, and community organizations.


Outside of advertising, we knew that our proprietary technology could help reveal other pressing concerns about city life. That’s why we work hand in hand with local governments and share traffic and air quality data to help paint a better picture of what’s really happening in a city.


So, how does your background fit into that? What inspired you to found a company like Firefly?

I’m lucky to have earned both an education of both the head and the heart and Firefly is the fruit of these studies.


My technical and business acumen comes from a deep familiarity with the space. I have a mechanical engineering degree from Brown and later on I became a researcher at its school of engineering. While I enjoyed pure research, I knew in my heart that I wanted to have a more immediate impact on the world. That’s why I earned an MBA from Stanford and began working in the world of venture capital – to learn how best to build and scale businesses.


Alongside this, I began working with refugees of the Syrian Civil War and Habitat for Humanity. As much as anything else, this was crucial to forming my belief in the absolute need for purpose-driven companies that sustainably uplift the people and communities they touch.


Bringing more ads to cities isn’t often met with positive response, but it seems like that’s exactly what Firefly’s launch got. Why do you think that is?

I think it’s due in large part to our community-first approach. We’ve taken growing this company slowly and were actually in stealth for a period of time. This allowed us to enter in conversations with all relevant stakeholders and to iterate our approach until we were certain in benefitted all parties involved.


We started Firefly with those community values baked into our DNA, built directly into our model. Often you see that tacked on as an afterthought, but our whole mission with Firefly is to elevate every pillar of a community. Not only do we dedicate free media inventory to city PSAs and local nonprofit groups, but we also reserve space for local small businesses, so we’re adding value for those on the ground, living every day in the city — not just catering to the interests of major corporations.


Plus, with the rideshare gig economy making up such a major part of any urban area, the direct value-add for that community definitely differentiates our offering.


Overall, we built Firefly to provide actual value to a communities, and I think that’s felt.


Your goal is to increase wages of America’s rideshare workforce. Can you share some stories on the impact Firefly is making for drivers?

Absolutely. To set the stage, it’s no secret that the rideshare market has grown increasingly saturated. And as that’s happened, driver wages have stagnated, meaning drivers are forced to work longer hours in order to earn a healthy return. Firefly’s model is set up to offset that challenge.


One of our drivers, Jackeline Arana, has been with Firefly from when we first started — when we were still beta testing in stealth mode. She saw one of our screens out on the road, and she followed the driver, ultimately flagging him down to ask him about it. As a full-time driver and a single mom of two, she was looking for an entrepreneurial way to add additional income to her drive time, and she ultimately found Firefly. As a Firefly driver, she now makes an additional $400 a month, and credits Firefly as one way she’s been able to pay for her daughter’s university tuition. It’s stories like Jackeline’s that are the reason why we started Firefly, and the reason why I wake up every day excited to come to work, to grow this company, and impact even more lives.


You refer to Firefly as a ‘smart city media network.’ How is Firefly helping to power smart cities?

First, we’re improving the ability of businesses of all kinds – including those traditionally locked out from powerful advertising campaigns like nonprofits and small local businesses – to super effectively reach the people who matter to them. In this way, we’re connecting consumers and businesses and promoting economic growth. For instance, the Coalition of Clean Air ran a campaign with us that ultimately received 2.9 million impressions and over 1,000 hours of exposure. This sort of thing wasn’t possible for them before with static billboards and screens.


We also work hand-in-hand with municipal governments to provide valuable data. In partnership with the Clean Air Coalition and PurpleAir, we ran an integrated pilot program measure air quality, testing demo vehicle installed with PurpleAir sensors to monitor air quality via its vehicles. This was especially significant during p the devastating wildfires and resulting hazardous air quality in the Bay Area late last year, and that data was leveraged by the Coalition for Clean Air in its efforts to provide relief to citizens and help to make significant planning decisions for the city during the fires.


Wow, that’s impressive. As a pioneer in the smart city movement, what trends do you see? How far are we from a ‘smart’ future?

Flying cars may not yet be here, but in many ways we’re already seeing elements of smart cities take hold and transform the way we live in them. Having seen the rapid evolution of booming urban areas across the country, I see a future powered by platforms like Firefly — in the cities of tomorrow, I believe transportation will be subsidized by media platforms like ours, that are able to simultaneously generate revenue while also providing a valuable service to municipalities.

How Can Your Startup Battle Google and Facebook? Take a Page out of Liftoff.io’s PR Playbook and Focus on Community

As Facebook and Google, advertising’s reigning duopoly, maintain control of 58 percent of the mobile advertising industry, how are smaller players supposed to stand out against this immense shadow?  


The level of competition amongst these smaller companies has intensified over the past ten years as the industry has become inundated with a number of companies all claiming to deliver on a similar promise. Meanwhile, the rise of mobile marketing will lead to an estimated 500,000 jobs created within mobile user acquisition over the next decade, driving a need for professional development across the industry.


Winning on technology is not enough, which is why a new approach to competition has emerged, and why community-building is one of the best PR strategies you can adopt.


Against this backdrop, one company our firm VSC has worked with has become a stand-out success: Liftoff, a performance-driven app marketing and retargeting platform, has appeared on the Inc. 5000 list of the nation’s fastest-growing private companies for the second year in a row, with a three-year revenue growth of more than 3000%.

And, they’re doing it with a bottom-up approach.


Over the last three years, Liftoff has invested in its community through its Mobile Heroes initiative. It’s the brainchild of Liftoff’s VP of Marketing, Dennis Mink, who sought to give non-gaming app marketers a platform and a voice to talk about their experiences, share their knowledge, and build community — because non-gaming marketers had (and still have) a much harder time finding peers that face their specific challenges than those in the  mobile gaming industry. At the same time, there was a need within Liftoff to elevate the company’s brand; it was too challenging and expensive to compete against tech titans and other heavily venture-backed startups on spending alone, so Dennis played the long game, placing his emphasis on community-building.


The result was a program that highlights the everyday “Heroes” who successfully market mobile apps. What started as a program to support and provide valuable resources for marketers of non-gaming apps grew into a global community of over 50 thought leaders (and counting) across all app categories, sharing knowledge to advance the mobile marketing world.


The Mobile Heroes speak candidly about their day-to-day challenges, where they are finding success, as well as on things they haven’t quite figured out yet, providing a surprisingly frank and much-needed resource for the industry. Crucially, it’s filling the resource void for mobile marketers looking to grow their careers, while introducing emerging leaders to its solutions and driving business growth. At the same time, Liftoff taps these Mobile Heroes for case studies and testimonials to support marketing.


The program has become a dynamic community and professional resource where mobile marketing pros share their experiences and practical tips through podcasts, videos, and personal interactions to benefit all involved. Video interviews, podcasts, blog posts, webinars, comic books and a variety of live events, such as panels and breakout sessions, showcase the Mobile Heroes’ knowledge and make it available to the wider community.

Each Hero is chosen for a unique area of expertise they can bring to the community, and they have been very open in talking about topics ranging from how to directly impact revenue to the importance of brand safety — the program is not about sharing data or secrets, but about gathering meaningful advice. Mobile marketing professionals are also encouraged to nominate a colleague or themselves as a new Mobile Hero, such as Thomas Hopkins of Lyft, Esther Hwang of Poshmark, and Drew Frost of Sam’s Club.


The program taps the company’s owned media channels, including social, email newsletters, and blogs, as well as a dedicated microsite to feature the Heroes, their perspectives, and in-depth case studies on their achievements. At leading mobile marketing industry conferences like MAU Vegas and others, they bring their community offline, with dinners and other events a hot ticket.

Liftoff’s ability to create strong cultures that draw people in is evident in the booming internal growth of its company — in the three years since it began the Mobile Heroes program, Liftoff’s internal headcount quadrupled, and its culture honored in countless company culture awards.


Liftoff is not the first tech platform to focus on community: AdMob, in the first era of mobile ads, began hosting app developer meetups back in 2008 as a way to network and learn from others in the industry. Twilio, known for hosting literally hundreds of meetups around the world each year, took these ideas to scale: while now publicly traded, the company is in the fifth year of its SIGNAL conference, encouraging its customers, developers, and industry influencers to join together to connect and collaborate. Meanwhile, HoneyBook’s Rising Tide Society promotes a network on which creative entrepreneurs can share opportunities with one another… the list goes on.


The value of Liftoff’s community ultimately establishes the company as a critical component of the entire mobile user acquisition professional ecosystem, rather than just as a company selling a product. It’s clear that long-term commitment to community-building pays off in an era when every one of a company’s competitors begins effectively copying the other’s message, working to outspend each other at trade shows, and ultimately creating overwhelming noise and market confusion.


The Mobile Heroes program is a great PR idea that other companies should adopt when it feels nearly impossible to battle big, entrenched players, or cut through the noise when everyone in the space is saying and selling similar things (at least from the customer’s standpoint).


When this happens, relationships become the primary differentiator: communities shape products, and community-driven technologies turn out to be superior because they were designed by the customer — not just sold to them.


In some ways, what we’ve seen in politics and technology are similar. In a world where it feels like the establishment can outspend on resources, advertising and technology, the power of grassroots, community-driven movements can win.


What are some other examples of enterprise companies that have won on community? Let me know what you think in the comment section below.

Blockchain in the Physical World

We’re building two brands using blockchain-based technology that are reimagining communication and entertainment.

We introduced the world to Blok.Party, the first blockchain-based gaming console, enabling players to combine physical and digital play. The budding company has already generated millions in revenue and has received coverage in over 20+ key media outlets.

goTenna, introduced the first bitcoin wallet that works without the internet.

goTenna was doing decentralization before it was trendy and continues to lead the thinking on consumer security and financial privacy – which is especially important at a time when these values are coming under increasing political pressure.

ICOs can be dangerous. Here’s what needs to change.

Healthcare is the New App

The personalization of healthcare will be the app of the 2020s.  Advances in data science, machine learning and smartphone adoption will bring groundbreaking access, precision, and treatment to billions around the world. This is why we’re thrilled to introduce Mammoth Biosciences, an incredible healthcare company that has the potential to change disease detection via CRISPR.

Mammoth is the first company to commercialize this technology and is backed by leading VCs including 8VC, AME Cloud, NFX, and Mayfield.

Socks that Save Legs

The elderly deserve magical technology as much as everyone else. This is why we embraced the opportunity to help healthcare startup Siren.

VSC developed the messaging, positioning, and media relations for the company’s patented Neurofabric™, the first textile with microsensors embedded directly into the fabric, which helps people with diabetes continuously monitor for foot injuries prevalent among that population.

Health tech is going through a brand renaissance as consumers expect everything in their lives to work and feel as beautiful as Apple or Google products, and we were excited to bring this to life through Siren.

VSC Wins Silver Stevie PR Award for: Turning Machine Learning Tech into Financial Independence for Generation Z; How VSC and SelfScore Designed the Deserve Credit Card

SelfScore was a next-generation fintech company that uses machine learning and alternative data instead of relying on FICO scores to determine credit-worthiness.


We engaged with SelfScore when it was solely offering credit services to international students in the US lacking a social-security number, which is a requisite for most traditional credit cards.



The company aimed to build a brand with students and expand outside of just foreign students to all Americans that didn’t have traditional FICO scores due to lack of credit and financial history.



We recommended building a more consumer friendly brand than its existing name SelfScore, which felt functional and not aspirational in nature.


We brought in branding partners and participated in the process around a rebrand to Deserve because students deserve better.  


After research, it became clear to VSC that many credit cards focused on consumer segments and that positioning the card for millenials would be a crowded space. Thus we worked with Deserve to own the narrative around building a credit card for Generation Z, a new segment that was gaining popularity with the media, and overlapped with Deserve’s consumer segment.


By owning a new consumer segment, we believed Deserve could have a unique position in the crowded credit card industry and find opportunities to be included in ‘best of lists’ which were major customer signup sources.



Our campaign had two phases, we first launched the new Deserve Credit Card and then focused on credit card lists to maintain visibility.


The narrative around both phases was based on two pillars:


We expanded Deserve’s audience to Generation Z in the US who don’t have a credit history by showcasing how they ditched the antiquated FICO scoring model and use alternative data to measure credit potential for new users.


We also suggested and leveraged a rewards system that would appeal to this generation after speaking with college students about what they want. Deserve formed a partnership with Amazon Prime Student in which card holders are reimbursed for a year of subscription fees and receive additional rewards like free music and video.



We earned a total of 120+ stories with a combined reach of 672.6M for 2017 and 196M for 2018 so far, including stories in Forbes, TechCrunch, and NerdWallet. We secured briefings for the CEO with key media including the Wall Street Journal, Quartz, TechCrunch, Inc, Mashable, Forbes, Buzzfeed, and the Los Angeles Times.


25+ of the stories we earned were reviews and inclusions in ‘best credit cards of 2018’ lists in key finance and credit affiliate listing publications like ValuePenguin, CreditCards.com, and NerdWallet.


We partnered and collaborated with social media influencers in the college, fintech, and parenting spaces like Catherine Goetze from Cath in College and Rachel Ritlop from The Confused Millennial.



We successfully positioned Deserve as the first credit card designed specifically for Gen Z. Deserve earned the highest share of voice in 2017 at 34% when compared to competing student credit cards like Discover It for Students (at 30%), Capital One Journey Student Rewards (16%), Bank of America (at 13%), and others. Deserve has been able to maintain 28% of the share of voice in Q1 of 2018 and were just selected as a Fast Company World Changing Ideas 2018 Finalist.


Our efforts resulted in a 200% increase in credit card applications from young adults and college students, and Deserve recently raised a $50 million round to fuel overall company growth.


Here are a few of our favorite quotes:


Now [Deserve has] created a credit card that it hopes will appeal to Generation Z, or college-aged teens… ‘Our mission is to provide access to fair credit to deserving but underserved populations,’ CEO and co-founder Kalpesh Kapadia told TechCrunch… ‘Most of these kids do not have credit history. They cannot get credit cards without having credit scores.’ He believes that better indicators of creditworthiness are ‘reliability, discipline, education, employment.’



If you lack a credit history, getting a credit card or loan can be next to impossible. But one credit card issuer is aiming to change that.


[Deserve] launched new credit cards for students and employed individuals who lack a credit history or are looking to build or expand one.



One factor that distinguishes Deserve Pro from other credit cards catering to the underbanked, like for example Petal, is its rewards features. According to Kapadia, these rewards are picked specifically to appeal to Deserve Pro’s target audience of 18-29 years of age.

Banking Innovation


Here are some of the American Business Awards judges’ comments:


A very important initiative for both local and international students community.


Very well thought out strategy and approach – excellent campaign!


Great example of rebrand and product launch. Creative mix of social and traditional PR.


Great work and excellent media coverage results!


This is an impressive campaign with impressive results. Well done.

VSC Wins Gold Stevie PR Award for: VSC and HoneyBook Empower the Creative Economy with Fair Wage Insights and Legal Protections

VSC engaged HoneyBook in July 2017 with the objective of defining a brand voice and generating visibility in the business press, leading to increased customer sign-ups, validation, and recruiting.


While HoneyBook has a community of small business owners and creative entrepreneurs running their billing and invoicing on its platform, the challenge was to generate media attention for something as seemingly  mundane as invoicing.



After digging into HoneyBook, sitting down with the founders, and observing the company culture, VSC saw a bigger vision emerge.  We realized the company is in a market leadership position for a class not being represented online or in the media. We realized that the HoneyBook community is a key asset to leverage and pitched the company on the idea of becoming the “Zillow of the Creative Economy” with a data journalism PR program.  


Why “Zillow of the Creative Economy?”


Over the past decade, Zillow has earned market credibility and generated media interest by utilizing a team of economists who collect and synthesize real estate pricing trends that, through the distribution of this information, helps lead the U.S. real estate industry.


HoneyBook has similar potential to become a voice in the creative economy for wedding planners, DJs, event producers, and graphic designers, but does so through data and insights.



VSC worked with HoneyBook to institute a data journalism program where several in-house team members surveyed its community and generated insights based on major societal trends.


VSC suggested conducting two separate studies on the gender pay gap and sexual harassment. The pay gap study included data collection and an anonymized analysis of 200,000 invoices processed through the platform and over 3,100 customer surveys. For the sexual harassment study, 1,087 customer surveys were conducted.


Beyond simply reporting on results, VSC worked with HoneyBook to advocate for reducing inequities and delivering tools to help creatives justify higher rates. Additionally, HoneyBook developed a downloadable sexual harassment clause that could be included within freelance legal agreements.



Both reports generated major media coverage and went viral on social media, which resulted in a 44 percent increase in HoneyBook’s user base in just five months.


We generated 17 feature stories on the Gender Pay Gap Report, reaching a combined readership of 52M unique monthly visitors. Media coverage included: Entrepreneur, Fast Company, Fortune, Inc., Brit +Co, Mass Appeal, and Bustle.


The sexual harassment report was covered by five top-tier publications reaching 69 million monthly visitors. Coverage included: The New Yorker, Fast Company, Forbes, Fstoppers, and Staffing Industry Analysts.


The pay gap report has been promoted by important influencers like Chelsea Clinton on social media, resulting in a dialogue among women saying things like, “Bookmarking this for the next time someone I don’t know asks me to write something for free.”


The sexual harassment survey left users feeling supported on social media: “We are so proud to be @honeybook … community members because they provide a high end experience for our clients, cultivate a safe space and they align morally + ethically with us. Today they addressed sexual harassment in our industry. Thank you #metoo”.


Here are a couple of our favorite quotes:


‘ Men ask for more money and get it. Women are less likely to ask,’ she [HoneyBook co-founder Shadiah Sigala] says. The next step, she says, is to spread the word on these findings and help educate freelancers and contractors so they don’t sell themselves short.

– Barb Darrow, Fortune


These numbers are alarming not only for the widespread problem they suggest but as an indication of how far outside a basic accountability structure the supposed future of work stands. HoneyBook recommends that freelancers add anti-harassment clauses into their contracts.

– Nathan Heller, The New Yorker


Here are some of the comments from the American Business Awards judges:


Excellent program, leveraging proprietary data sets in a useful way, and showing how PR can contribute to business success (a 44% increase is pretty darned impressive).


Gender pay gap and workplace sexual harassment are important issues. Impressive communication strategy and coverage.


Super smart campaign – great job in connecting to relevant issues/topics for the brand and of course, wonderful results/impact!


Fantastic use of data-driven program and providing value-based results. Solid campaign.


Impressive customer growth and like the use of qualitative feedback in the award entry.

Women from the Blockchain

The decentralized nature of cryptocurrency and blockchain more broadly has the potential to upend traditional power structures and empower disenfranchised and otherwise marginalized groups.


Unfortunately, many of the same structural problems that plague traditional finance are already emerging in cryptocurrency, like the concentration of wealth in the hands of a few men.


While Coinbase reports more than 13 million cryptocurrency accounts, 94 percent of the wealth is held by men, and 95 percent is held by a mere 4 percent of investors.


Join VSC + YPOSF for an intersectional dialogue about how blockchain-based businesses can empower women.

Secure Tickets Here.


The panel discussion will be led by:

Lindsey Maule, CEO and Managing Partner of Luna Capital
Tammy Camp, Founder/ CEO of Stronghold
Lindsay Lin, Counsel & Program Manager at Lightyear.io
Brynly Llyr, General Counsel at Ripple
Maggie Philbin, Associate Director at VSC and event moderator



5:30-6:00 – Sign up, Appetizers/Beverages and Networking


6:00-7:00 – Discussion + Q&A


7:00-8:00 – More Networking

**While this event is being led by women, all are welcome to attend.


About the Organizers:

VSC is a strategic public relations firm based in San Francisco, flipping the script on how tech companies define their voice and tell stories. Our clients are pioneers in technologies across AI, blockchain, VR, hardware, mobile, adtech, enterprise, edtech, and e-commerce, plus innovative thinkers in venture capital and consumer products.


YPOSF is the leading Bay Area organization for young professionals to connect with one another and meet other young leaders in the Bay Area. We facilitate opportunities for our members to both connect and contribute to the community through monthly happy hours, professional growth events and regular community service events. Since 2010, our membership has grown to over 5000 strong and our networking events regularly attract more than 150 people.

Learn more at: youngprofessionalsofsanfrancisco.com

The Future of Cryptocurrency and Blockchain: Q&A With Protocol Ventures’ Rick Marini

The possibilities surrounding cryptocurrency have become an irresistible attraction for Silicon Valley entrepreneurs. In an age where it can seem like everything has been done, it’s a fertile field to sow new ideas and innovation. The excitement of planting the seeds for the next generation of technology and growing new investments drew serial entrepreneur Rick Marini into the world of cryptocurrency.


Marini started his career in finance and investment banking, but his time at Harvard Business School earning an MBA changed his perspective. Soon after graduating, he and classmate James Currier started tickle.com, which became the largest personality testing site in the world. The company survived the 2K dot-com bust and was acquired by Monster Worldwide. This ingrained the taste for entrepreneurship in Marini, who went on to found companies like BranchOut and Talk.co and brought them to successful exits.


With cryptocurrencies and related technologies poised to shake up Silicon Valley, Marini started Protocol Ventures, the first “fund of funds” focused on crypto assets.


With over 1,300 cryptoassets in a rapidly growing market, there’s no doubt that it’s going to be big. To learn why Marini got involved and to get a feel for what the 2018 cryptocurrency market holds, we interviewed Marini as part of VSC’s Freestyle Series. Here’s the best of what we talked about—you can also watch the full interview here.


Vijay Chattha: What got you so interested in the cryptocurrency industry that you started this fund?


Rick Marini: About four years ago, I was exposed to crypto for the first time. I was having dinner with Naval Ravikant from MetaStable and Tim Chang, a partner at Mayfield, and they were talking about this new crypto thing. I found all the applications of blockchain technology that could disrupt countless industries to be fascinating, as was the trading and tokenization. At that point, Naval was starting MetaStable and I wanted to back him, so I became an investor there. Some of us also did a separate fund called Binary Financial, which has also done very well. That’s where I started, but crypto didn’t become my full-time focus until I launched Protocol Ventures six months ago.


VC: What is Protocol Ventures, and what does it do?


RM: Protocol Ventures is the first “fund of funds” in crypto. There are about 200 crypto asset funds out there, so we take money in from investors and invest that into the funds. We do this to allow an investor to get diversified while bringing better access and prices. Of the 200 funds, we’ll invest in what I believe will be the top 10.


The funds that we invest in are only focused on what I say are “the coins,” not the company. The coin side is made up of highly liquid ICOs and especially the tokens—think Bitcoin or Ethereum. Right now crypto trades range from $50 to $60 billion a day.


VC: So why start Protocol Ventures?


RM: I initially invested in MetaStable and then Neural Capital. They were new funds that did 60x return last year when the S&P did 20%. I realized that they and larger family offices wanted exposure to this asset class, but might not have the knowledge of the space or relationships with crypto hedge fund managers. From there, the decision to start Protocol seemed like an intuitive next step.


VC: How are the funds performing since you’ve been getting involved in them?


RM: We launched in October 2017 as a new fund, and in the first month of our full deployment into the market, we were up over 40%. This past month, of the funds that have reported so far, one is up 58% and the other is up 85% for the month—they almost doubled the entire fund in a month.


If a VC firm can do 3x over a 10-year period, they’re a top-tier firm. These guys are getting 50 to 80 percent returns in a month. It may not be sustainable, but that’s the reason for our approach to diversification.


VC: Now that we’re able to trade 24/7, is it time to automate a hedge fund manager?


RM: Not yet. The information advantages that these hedge fund managers have is better than almost anyone else. When you have information advantages, you are going to blow away any kind of return that a robo-advisor could do.


VC: When you hear these kinds of numbers, how are VC’s and these 10-year funds feeling right now? How is it impacting the entrepreneur scene in San Francisco?


RM: On the VC side, they’re trying to understand blockchain technology, how to win on both the token side and the equity side so they don’t get left on the sidelines. They’re obviously very interested, but many don’t have the ability to invest in funds or tokens because of Limited Partner Agreements (LPAs) that dictate what they can and can’t invest in.


On the entrepreneur side, many are asking themselves, “Maybe I should just trade and do this.” Or, “Should our companies enter the blockchain area? Should I do an ICO, or traditional fundraising?”


VC: In terms of startup ICOs, it feels like I hear founders mention raising an ICO almost as often as saying they want to raise a venture round.


RM: I think 97% of ICOs are garbage. The problem with ICOs is that mom and pop now are putting in $100,000 because their neighbor made a bunch of money. The FOMO builds when people are expecting a big return.


Think about it this way: if you have a hundred entrepreneurs in a room, every one of them thinks they should raise venture money. The reality is, maybe 3% should—the other 97% never should be funded. My problem is, the 97% that are being funded right now by mom and pop are going to end badly. This is why we need regulation.


A lot of entrepreneurs want an ICO because you can raise massive amounts without getting diluted. By contrast, when you raise venture capital, you’re getting 25-35% diluted in a single round. Also, all you need for an ICO is a whitepaper that says, “This is what I want to build. I didn’t build it yet. Can you give me money?” It’s like a glorified Kickstarter.


There are special cases: two and a half years ago, Ethereum raised $18 million in its ICO, and today it’s worth $100 billion. That, to me, is like investing in a Google or Facebook—something that comes along once every five years. It’s exceedingly rare, but it also plays a vital role in the ecosystem.


VC: Banks are now getting behind certain types of crypto. Will the market go to where this money goes? Or will that money go to where people are investing today?


RM: It’s both. Right now, there are about 1,300 crypto assets. I would argue that only the top 100 matter. That number will expand to what matters, and the top hundred will also shift on which are the most important. Bitcoin and Ethereum aren’t going anywhere, and the top 10 are going to be there for a while.


This is very much like the internet in 1994-95. You’ve got some big names that are no longer around, and you have some like Amazon that became one of the biggest companies out there. It’s still very early days, just to be clear. That said, just because you do an ICO, or just because you start to use blockchain technology, does not mean you’re going to win. You’ve got to have everything lined up as if you were out there raising a series-A round.


VC: There’s a lot of people discussing the potential for blockchain and cryptocurrency in developing markets where inflation is rampant. What do you think about that?


RM: A lot of the use cases that I see crypto being really important and valuable for don’t necessarily affect a lot of us in the U.S. In areas of hyperinflation or extreme political unrest where they don’t even believe in their currency anymore, crypto is a really interesting alternative.


When Bitcoin was trading at about $7,000 here, it was trading at $10,000 in Zimbabwe. That’s because they were trying to take their money, whatever it was worth, and move it into crypto as a store of value. Bitcoin is not very stable, but it’s more stable than the currency in hyperinflated markets.


VC: Many governments must feel threatened by the number of cross-border transactions happening and its potentially nefarious uses, not to mention that they don’t get a cut. How do you predict governments will react to crypto’s rise?


RM: Governments want to control their own currency. Bitcoin or any other cryptocurrency is not owned by any government, by any company, by any person; no government can control it.


Now that crypto’s viability is no longer in question, I think most governments are figuring out how to adapt. This includes regulation and taxation. The U.S. government just came out with clarification on tax: every transaction with crypto is going to be taxed. I believe we need more regulation. It will hurt in the short term, but I believe it will eventually add a zero to the market cap.


VC: Why do you believe there’s a need for regulation?


RM: There’s a lot of big money—pension funds, endowments, institutional money—that is sitting on the sidelines, waiting for clarification. They don’t want to put the Harvard Endowment or the Stanford Endowment at risk if they don’t have enough answers. Right now, they don’t have enough answers around regulation. I believe there’s a lot of money that will come into the crypto market once we have clarity on that.


VC: Do you think governments will issue their own sort of cryptocurrency in the future, or favor more of an oversight role for cryptocurrency transactions?


RM: One of the things that I’ve heard is that a government could either have a gate that says “everything that goes in, you’re going to have to buy our crypto in order to be able to go in, and buy our crypto to go out,” or just operate from the tax side.


The reality is that the crypto market doesn’t need a U.S.-backed crypto unless there’s a utility reason for that. I think it would probably do pretty well because people would feel some comfort level that it’s the U.S. government backing it, but I don’t think that’s going to happen. I think they’re going to focus on if this is a security or a commodity. Right now, crypto is classified under what’s called the CFPC, which means it’s a commodity. The governments just have to give more clarity and more regulation.


VC: What do you think the chances are of the government actually taking regulatory action in its current anti-regulatory environment?


RM: We have some clarification on taxation that in 2018, all crypto transactions are going to be taxed as if you’re selling your stock. I have friends who are on an SEC-type of commission where they’re trying to understand what people in the industry do. I love that they’re taking a more measured approach, and didn’t just jump into regulation before they fully understood the market.


At some point this year, they are going to have to come out with solid clarification on if crypto is a security or a commodity. The weird thing about cryptocurrencies is that it’s actually both. This is why it’s taken so long to determine because there are aspects that are both, so the agencies are left figuring out who is going to regulate this.


VC: What do you think about China’s crackdown on crypto?


RM: China was the number one crypto country in terms of trading six months ago, but they wanted to clamp down on currency outflows, so they regulated it to abruptly stop all trading. They went from $4 trillion of reserves down to $3 trillion over a two-year period.


The day that China had come out with news around banning ICOs, Bitcoin went from $4,000 to $3,000. That was September 15, 2017. Today, Bitcoin’s at $16,000 or so. That demand just got sucked up by Japan, Korea, and the U.S.


VC: If you had a thousand dollars, a hundred thousand dollars, or a million dollars, where would you place your bets right now?


RM: Investing in crypto on Coinbase is the easy way to start. It has a $5,000 limit on day one, so you’re going to be kind of limited from the get-go, which is probably a good thing for most people.


Coinbase only has four currencies: Bitcoin, Ethereum, Bitcoin Cash, and Litecoin. I’m not giving investment advice, but I think it’s hard to bet against Bitcoin and Ethereum, and I say that because they have two different use cases: a store of value and smart contracts. If you believe that I’m correct and that a lot of capital is going to enter the market and it’s going to go through those two, it’s hard to bet against them.


There are more investment opportunities coming, too. The Winklevoss twins have been trying to get their ETF approval for a couple of years now, like buying a stock that’s the equivalent of an index of cryptocurrencies. I think that would be a good way for people to dip their toe in the water and have liquidity as well.


VC: What do you and your fund managers think is going to happen with crypto in 2018?


RM: Right now, all the fund managers we’re invested in are long, meaning everyone believes 2018 is gonna be another big year. It won’t be 2017, where the entire market grew 40x in one year, but I can give you three reasons why I think 2018 will good.


One is the retail investors coming in. Over Thanksgiving weekend 2017, over 300,000 new accounts were started at Coinbase. Everyone is trying to get money into crypto. I opened up a Coinbase account for my father-in-law over Thanksgiving. He’s a 72-year-old with a Ph.D. in chemistry. He’s not a techy kind of guy. Now, mom and pop are coming in.


Number two, Wall Street infrastructure is coming into play. Both CME and CDLE launched Bitcoin derivatives for trading in December. Then NASDAQ and others are going to be launching in Q1 and beyond.


Number three is that Wall Street money really hasn’t come into crypto yet. Even [JPMorgan CEO] Jamie Dimon has changed his tune on Bitcoin, though he always said he’s a believer in blockchain technology. As Wall Street money comes in on a limited supply in a fairly small market cap— $750 billion today—I believe 2018 will another big year, and so do the hedge fund managers we invested in.


As for actually using cryptocurrency to make purchases, I don’t think you’re going to be buying a cup of coffee with crypto in the next year or two. And when you can, it’s probably not going to be with Bitcoin, which is more of a store of value. It could with some other currencies, like Bitcoin Cash, or Litecoin, or some others that are trying to be highly scalable.


Any final thoughts on the future of cryptocurrency?


I think everybody wants crypto to be fully functional. To bring back the internet example, we’re in the dial-up days. You could look at that and be like, “This is stupid.” But we’ll probably get to high-speed DSL in three or four years, so I would say to be patient because there’s so much potential and it’s going to be awesome!

Introducing Founder Scaling

We’ve helped over 250 companies scale their message to the world.

Now we are helping our founders scale themselves.

VSC is announcing a new partnership with Dane Holewinski, a former founder turned executive coach who works with startup CEOs to navigate the intense pressure, complexity, and opportunity of building a rapidly growing company.

What our clients can expect:

  • Startup CEO 360 – independent assessment of your strengths and areas for development across 16 Startup CEO Competencies
  • Mini projects that will deliver a clear development plan for elevating your skills in a few short weeks
  • Clarity, focus and confidence for your executive team
  • An initial complimentary coaching consultation – request at stacy@vscconsulting.com

Prior to coaching, Dane spent over a decade building companies in Silicon Valley including VSC partner Greystripe which sold to Conversant in 2015.

What Dane’s clients are saying…

I turned to Dane after hearing glowing recommendations from a number of entrepreneurs I trust. They were spot on. As a former venture-backed startup founder himself, Dane helped guide me through the noise and isolate the signal so I could execute from a place of clarity, confidence and strength. Not only am I a better CEO for working with Dane, I am a better human – more balanced, happy and clear than ever before. I recommend Dane to any CEO looking to gain a competitive edge.

– Dale Fox, Co-Founder & CEO, Tribogenics

Dane helped me shift mindsets from ‘building great products’ to ‘building a great company’ by uncovering and unlocking patterns that were keeping me from reaching my full potential as a leader and person. Our work together allowed me to find the space to be more strategic, build a powerful exec team, delegate and build the foundation for a world-class company all while being less stressed, healthier and happier.

– Co-Founder & CEO, Jonathan Matus, Zendrive

Intrigued? Request a complimentary coaching consultation at stacy@vscconsulting.com.

Startup Storytelling with Y-Combinator Partner Kat Mañalac | VSC Freestyle

We invited Kat Mañalac from Y-Combinator to our office to share her thoughts on startup storytelling, media outreach, Silicon Valley culture and more.

Kat is a Partner and the Director of Outreach at Y Combinator. Her focus is on finding great entrepreneurs for the Y Combinator program, and has developed programs like YC Hacks and helped take YC’s Startup School global.

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