Andrew Wilkinson – Buying Profitable Tech Businesses, Crypto’s Future, Losing $10mm on Flow

Tiny Capital Co-founder Andrew Wilkinson calls into the show to discuss his approach to buying wonderful internet business, taking WeCommerce Holdings public on the Toronto Stock Exchange, and what he thinks the future could be for crypto and NFTs.

Andrew is Co-founder of Tiny, a technology holding company using a simple one-month acquisition process, then leaving the companies alone to do their thing. Home to companies like Dribble, Flow, Creative Market, and Unicorn Hunt.

Originally Aired: 05/18/21
#VentureCapital #eCommerce #Investments

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Full Transcript:

Alex Moazed (00:08):
Hello, I am Alex Moazed, and welcome to Winner Take All. I’m really excited to have with us, special guest today, Andrew Wilkinson calling into us from Canada. He’s a famed tech investor, he’s an entrepreneur, he now has a public company. Andrew, thank you so much for joining us, really wonderful to have you.

Andrew Wilkinson (00:29):
Great to be here, Alex. I’m a big fan of your book and excited to be here.

Alex Moazed (00:33):
That means worlds to me, especially as a guy who actually owns just one or two platform companies of your own there. Been really looking forward to having you on the show and just getting to know more about how you think about investing and some of your story.

Alex Moazed (00:54):
With the most recent thing, most recent event or I guess your first public company IPO event would be WeCommerce. Could you, why don’t you start us off there? What is WeCommerce, how did all that come about? It’s only been around since 2019, really amazing story.

Andrew Wilkinson (01:15):
Yeah, so I’m based in Canada, I live on the West Coast over in Victoria. About 15 years ago, I started a design agency and I happened to be at a conference and I met Harley and Toby from Shopify. So this would’ve been in about 2009 or 2010, and at the time, Shopify was just a small bootstrapped company. They were based in Canada too, and so we got to know each other a little bit. They said, “Look, we’ve got this problem. We have all these merchants using our platform, but they all want custom design. So we really want to have a diverse set of templates, want people to be able to log into the Shopify platform and choose from 20 or 30 different designs. We want you guys to be our first partner on that.” So we said, “Oh, we’re a little busy running this agency bu we’ll do these guys a favor, they seem really nice. they’re fellow Canadians.” We launched a few themes on their platform.

Andrew Wilkinson (02:24):
The neat thing about what they did is, they created a marketplace. So anyone could create a theme and then you could charge between $50 and $250 for a merchant to use your theme. So we did that, and it… within two years or three years, we started doing hundreds of thousands of dollars a month in revenue, and it just took off. We never would’ve predicted this, but we were a barnacle on a whale and as Shopify became the dominant platform for independent E-commerce, we continued to benefit.

Andrew Wilkinson (03:01):
But we made a critical mistake, which is in 2013, we actually sold that business. At the time I was overwhelmed, my business partner and I were running five or six different businesses and we ended up selling that company to a family office. We stayed on the board, we kept 20% and passively watched from the sidelines. Around that time, I came into a bunch of money because I had sold my business. So I said, well, I need to start understanding investing. So I started reading books about great investors and the first book that I picked up was, The Making of an American Capitalist, the book about Warren Buffett. When I read about Buffett, I read about moats, and when I read about moats, I realized that we actually had a business with a moat. We had a dominant position on a platform and over time we had gotten to a point where we had a very large market share and it was difficult to join because building a theme took quite a bit of time. So the business was actually very, very exceptional and I regretted selling it.

Andrew Wilkinson (04:12):
So I watched from the sidelines as the business continued to grow. Ultimately, really developed a thesis around Shopify becoming the dominant player in independent E-commerce. Eventually, I ended up approaching the board of the business and saying, “Look, I’d like to buy the company back.” So I sucked it up, I paid something like five times what they had paid me, and I acquire Pixel Union, that original theme business. At the time I did that, we ended up creating a holding company called WeCommerce, which we wanted to focus around acquiring the top players in the Shopify ecosystem. So, Shopify ecosystem is apps, themes and services. We started acquiring a variety of businesses in that space.

Andrew Wilkinson (05:03):
In December, we ended up taking that business public on the Toronto Venture Stock Exchange up here in Canada. Now for five months, we’ve had a public company, so lots of learnings, but overall it’s been a great experience.

Alex Moazed (05:16):
That’s great. I was going to ask you. I was thinking, oh, that must be Pixel Union, but I didn’t realize that you had started that, sold it, and then bought it back, but it seemed to me that just based upon what you do in Tiny, which we’ll get to here in a second. I was like, what was the anchor for WeCommerce? So okay, so that makes sense, that helps fill in some of the gaps for me.

Alex Moazed (05:40):
Bringing it full circle then on WeCommerce is, technically, technically WeCommerce started in 2019 but you could also say that it started with Pixel Union many, many, many years prior. Then this one was really interesting where I think with your other deals, you don’t have a formal fund, you don’t have a bunch of LPs, but in the WeCommerce model you did bring in some outside investors. You did do a rapid roll-up, I guess, actually, let me take that back. Rapid for you, it’s rapid for other people, it’s not rapid for you, it’s just what you’ve been doing at Tiny, but you bought a handful of other businesses, packaged that up into a model which seems very similar to Tiny and what you just have been doing for many years anyway. Bundled these up, put them in a sequence of, it’s all around Shopify, and that was essentially the SPAC or what is it, an RTO? It’s the Canadian version of a SPAC that you did a handful of months ago. Is that right? What did I miss in that? What are the gaps there?

Andrew Wilkinson (06:49):
I would say it’s quite different from a SPAC. So in Canada, the most popular way to go public for small companies is a reverse takeover. It’s similar to a SPAC in that you’re basically merging into a shell corporation with some capital in it. The difference is that it’s a very small amount of capital. So where a SPAC might have 100 to 500 million sitting in it, a shell corp might have 300K in it, or 500K. So the dilution hit you take is minor, and essentially it’s a trade off. You say, look, I can go public in three months instead of five months. I don’t have to do a roadshow. It’s very similar in many ways. The costs that you would otherwise incur doing a traditional IPO are actually quite similar to the dilutionary hit that you take by merging into the shell corp.

Andrew Wilkinson (07:42):
So for us, just speed to market was really worthwhile and it worked out well for us, but it wasn’t a SPAC. A SPAC comes with a lot of connotations around taking a 20% dilutionary hit and taking in a bunch of aggressive money and projections and stuff. I’d say it’s really not that. At the end of the day, you look the way Berkshire has evolved, they have different verticals that they have started to build almost mini holding companies within. So Berkshire Hathaway Energy or the insurance businesses for example, where they have a leader at the top who’s also allocating capital within that group. I would say we’re just doing the same thing. So at the end of the day, we saw a vertical in Shopify that was so attractive that we felt that it deserved its own holding company and because of the opportunity that we saw, we said, look, it’s really logical for us to go out and raise additional capital because we want to move quickly and strike while the iron’s hot with a very large elephant gun.

Andrew Wilkinson (08:47):
So we raised $60 million in the IPO and we’ve been deploying it aggressively into a variety of acquisitions. We actually just closed a deal in the last month. We bought a company called Stamp, which is one of the top ratings and reviews players on Shopify.

Alex Moazed (09:03):
This is part of your normal deal making process, where it’s start to finish in four weeks, you’re completing this acquisitions in basically a month’s time. Is that right?

Andrew Wilkinson (09:16):
It’s what we try to do. I mean, it really comes down to the founder. So some founders are like me. I mean honestly, the whole Tiny process is really designed about around my personal experience dealing with private equity. When I owned just five businesses back when I would sell businesses or look at selling businesses more frequently, we would get approached by private equity, and it would be a six to eight month miserable dance that required tons of in-person visits and flying all over the place and wasting time on financial models and stuff, before actually talking about the meat and potatoes of the deal. I always just wanted the private equity firm to say, “Look, send me your financials, we’ll send you an offer.” That’s what we try and do.

Andrew Wilkinson (10:01):
Really, reading about Berkshire made me realize that yes, this is possible and there’s a reason they do the dance. There’s two primary reasons they do the dance. One, they’re fiduciaries, they need to tick boxes and stuff. Number two is it’s negotiation. So they often can give you a very attractive looking deal, and then over the course of six months, they pick apart your business, they renegotiate all the terms and it turns into something that wasn’t contemplated. Often, founders are so exhausted by the end of it that they just go along with it.

Andrew Wilkinson (10:34):
I said I’d love to do what Buffett does and just basically have someone share their numbers, I’ll tell them whether or not their asking price makes sense, and if it does, then we’ll try and close the deal in 30 days. Sometimes lawyers get involved and founders like to take more time getting to know us and stuff. Other times, people want to sell businesses in two weeks, and we’re happy to go with the buyer.

Alex Moazed (11:02):
When you get down to brass tacks, it shouldn’t take months and months and months to figure these things out.

Alex Moazed (11:07):
So, let’s go to where you started many years ago, which was MetaLab. There’s a great Tweet thread that you have where you talk about… this is a story about how I lost $10 million by doing something stupid. Ten.Million.Dollars. Literally up in smoke, money bonfire. Then you have a great thread talking about the in’s and out’s of what happened here, but take us in the way back machine, Andrew. What was MetaLab, how did it flow? How did you get going to even just get to the point of Tiny, which we’re going to talk about here, I promise, but. How did this all start way, way, way, back?

Andrew Wilkinson (11:59):
So I’m not one of those kids who loved business in high school and had lemonade stands and all that stuff. I thought business was a boring thing that my dad brought home in a brief casing looking dejected, I had no interest. I basically stumbled into it, so when I was high school, I started a tech news site just for fun. I was learning how to build websites and to be totally honest, I wanted to try and get companies to send me free products. So at the time, there was all these websites that reviewed technology products and Logitech and Apple and all the big tech companies would send them stuff. I started this website and started posting news that I’d write myself with other teenage nerds who I had met on the internet.

Andrew Wilkinson (12:51):
To my surprise, it actually took off and we started getting tons of advertising. Got to travel to Mac World and interview Steve Jobs, and had all these amazing experiences in high school. I like to joke that I got my MBA in high school because I pretty much skipped high school and managed a team of writers and developers and stuff, and started negotiating deals back when I was 16. So I started really young.

Andrew Wilkinson (13:23):
The big misfire was when I graduate high school, I said, well, I guess I’m doing journalism so I’ll go to journalism school. What I didn’t realize was I actually love business, I love building a business, building a team, doing deals, all that kind of stuff. I just didn’t really register that as an option or what I was doing.

Andrew Wilkinson (13:45):
So I went to journalism school and on day one they sat us down and said, “Hey, we’re going to prepare you over the next four years to go write for one of the big papers.” I’m just going, newspapers? This is 2004 but it was very obvious newspapers were dead, and that I was learning an antiquated craft. So I dropped out after a few months and had an existential crisis trying to figure out what to do. I ended up deciding after reading a book about Google, that I wanted to move to Silicon Valley. It seemed like there was just so much exciting stuff happening down there, but I was dead broke. So I said, okay well maybe I’ll sell my design services. I know how to build websites, maybe I’ll freelance and just make enough money that I can move down to Silicon Valley, and then I’ll go get a job.

Andrew Wilkinson (14:36):
I started looking around at all these job board websites and finding all these freelance gigs, but I realized that I was competing with agencies. So I made myself look like an agency, I came up with the name MetaLab, designed a really nice looking website, and I started calling startup founders and fortunately, I’d been selling ads for my website for the last five years so I knew how to talk on the phone and negotiate and pitch myself. I ended up closing $20,000 or $30,000 of work in the first couple months. Before I knew it, I was thinking, well geez, why would I ever move to Silicon Valley? I can make a killing selling the same services I would otherwise be doing as an employee to all these startups down there? I get to meet all these interesting people and work on a much higher level. So I started doing that.

Andrew Wilkinson (15:31):
Within about five years I had Apple and Walmart and Google as clients and had grown it very significantly. I had a really great problem, which was, I had profits and I didn’t really know what to do with those profits. So I had always romanticized the idea of owning a software company. Running an agency you’re always two months away from bankruptcy, where you never know where you’re next dollar is coming from. The idea of recurring revenue was magic to me, so I started a variety of SAS software businesses, initially just to help me run the agency. So project management software, invoicing and estimate software, time tracking software. Those were my first taste of recurring revenue, it was pretty magical to go to sleep and wake up and have made $200 while I slept. So I got totally addicted to this idea of building out more and more businesses.

Andrew Wilkinson (16:32):
I stumbled into investing. What ended up happening is we got big enough that we had excess cash and I just couldn’t keep starting companies, it wasn’t sustainable, I wasn’t doing a very good job of running five or six companies at once. So I said, well, I’ve got to start buying businesses and doing more passive investing. When I read about Buffett, I just realized that I could actually delegate all this to CEOs and so we separated all the businesses, we handed the reigns to CEOs, and when that happened, we realized that the businesses could grow much faster without us trying to split ourselves across all of them. So for the last seven years I’ve been buying businesses, hiring great CEOs, and letting them do their thing and just leaving them alone.

Andrew Wilkinson (17:21):
All of our businesses are unique in that they’re technology companies that are actually profitable. So we don’t focus on flashy metrics, we don’t do anything cutting edge. We really focus on building profitable, sustainable technology businesses.

Alex Moazed (17:35):
You’re buying what some might say are boring, profitable internet companies. They’re not threatened, it’s not the, we’re going to be a unicorn and that means that if we’re going after this unicorn we got to get a bunch of VC money and a tech monopoly is either going to buy us or try to copy us or destroy us or some mixture of all three. But you’re buying businesses that are sustainable, that you can invest in and you can give them a lot of autonomy. You’re not even joining Tiny with the prospect of, oh, there’s a bunch of synergies between the portfolio, that’s also the Buffett model. You give them autonomy, they stay in their own lane, and you just give them advice when they want it. You have a good eye and are a good and patient investor is another thing you talk a lot about.

Alex Moazed (18:30):
So that’s where Tiny started, now Tiny has I think over 35 businesses. I guess, your version of Buffett’s insurance companies that were spinning off capital was or still is to some degree, your services business, your agency model here, which was generating these profits. Then obviously you started things like Pixel, and then sold that off and you also go capital from that, which you were able to, I guess, invest in other areas. That’s some of how you got the initial capital for Tiny, is that right?

Andrew Wilkinson (19:06):
Yeah, yeah, so we never until we did WeCommerce, we never raised any outside capital and we bootstrapped absolutely everything. That’s not because we were opposed to raising capital, it was, we didn’t know venture investors, there’s no private equity firms approaching us in the early days. We couldn’t get even bank debt, Canadian banks are very conservative, we could barely get credit cards, let along a business loan. So at the end of the day, we just had to become incredible disciplined P&L investors. We didn’t know how good our businesses was, we didn’t know that it was special to have 40% net profit margins until we started looking at other businesses and we realized that oh my god, there’s all these people running technology businesses like cowboys and just burning money endlessly. You don’t have to do that, there’s this third door where you can run sustainably and you can still grow very fast while also being profitable. So that’s the lens that we look through.

Andrew Wilkinson (20:12):
Most technology investors, especially at the $10 to $50 million revenue scale, they don’t think about profits much. They think about, how do we become the next unicorn? That’s just not our thing. I joke that we do boring businesses, I don’t really mean boring, I just mean we’re not doing drones and VR and AR stuff. We’re doing the mom and pop, main street businesses of the internet.

Alex Moazed (20:40):
It’s great to be able to carve out your own territory where the VCs aren’t interested because their TAM isn’t big enough, where the tech monopolies aren’t interested similarly because the TAM isn’t big enough. So you’re under the radar, right?

Andrew Wilkinson (20:56):
Totally, also, I mean we do have businesses that are pretty sizable scale, but they’ve gotten to a point where they’re difficult to disrupt. So you look at Dribbble, you took a billion dollars and Microsoft decided they wanted to create a Dribbble competitor, it could be really hard. I think as long as we treat that community well, there’s tremendous network effect and platform lock-in. So that’s an example of a business that’s now quite large but it got there by us just being disciplined and slowly compounding and focusing on the right stuff.

Alex Moazed (21:34):
I just want to touch one more thing on this idea of the tech monopolies. So not only is your investment thesis saying, okay, we’re flying a little bit under the radar, we’re going to get to platforms in a second. But you have lived and breathed and part of your story around the $10 million being lit on fire story, is you essentially encountered what happens with tech monopoly money as your direct competitor. That was Flow versus what many of us now know as Asana, and this guy, Dustin Moskovitz, who was able to… What was that meeting like, where he met with you and told you what the future would look like?

Andrew Wilkinson (22:22):
Well he was actually very friendly. I mean, Dustin is like a very nice, quiet spoken guy, despite being the billionaire co-founder of Facebook. We were basically just having a coffee and I think the subtext was, I think he wanted us to join them and he said as much, “Why don’t you join us?” As we talked about what we were working on, I was saying, “I don’t think we need to raise money. Why would you raise all this money?” He goes, “Well, we’re going to be able to do marketing and expand dev and we’re going to be very competitive with you.” I just didn’t want to hear it, I didn’t understand competitive advantage.

Andrew Wilkinson (23:02):
I joked in that Tweet that essentially, it was the equivalent of Fiji saying, “We’re going to invade the United States,” because we were in a hyper competitive space with massive R&D requirements where you had to buy almost all your customers via PPC and marketing, and we were doing it on a shoestring budget. I think I was spending maybe $800,000 to $1 million a year for most of that time.

Andrew Wilkinson (23:28):
So what ended up happening was we built a great product initially that was a bit of a competitive advantage because they didn’t have great designers and stuff, but over time they figured that out, they outspent us, they became the dominant name, they became the most integrated with, so other apps integrated with their API. Before you knew it, when you compare Flow to Asana, they ticked a lot more boxes in the matrix and more people knew them and trusted them and more companies used them and standardized around them. So in many ways, we lost the battle. We still have actually a good, profitable little business, but based on what it could’ve been, I think it was a huge failure on my part to understand competitive advantage and the venture dynamic. If you’re going to go to compete against venture folks, it’s like… and you’re going to be bootstrapped, it’s like going to a gun fight carrying a knife. It’s just not going to be very effective.

Alex Moazed (24:29):
We all know how that one plays out, so yeah, no, that’s very sound advice there.

Alex Moazed (24:37):
So there’s a good real deep dive on how Tiny is run. This guy did the operating manual for how Tiny is run. Lots of really good insights in here, but one thing this guy says is, “I don’t know if this is by design but it seems like Andrew has progressed from services to tools/products to platforms, communities and digital marketplaces. Do you see it that way, or how do you think about your investment philosophy and the types of business models of these internet companies that you have been focusing on as time has changed and over many years that you’ve been doing this?”

Andrew Wilkinson (25:16):
Well, I think the advantage that we have is that we are operators, and so we know how hard businesses are. So when we look at a business, we can usually say, A, how founder dependent on this… or sorry, how founder dependent is this? How hard is this to operate? How hard is this space? What are the competitive forces or counter reeling forces or whatever? Then, is this a space that is growing or dying?

Andrew Wilkinson (25:47):
Sometimes it’s the actual business is slowly dying or slowly growing or whatever it is, but at the end of the day we’re betting on the trend. We’re saying, is this a business that we can own for 10 year, and why? Can we get our money back at the end of the day? Like Buffett, we have evolved from loving cheap things to actually really being ready to pay up when we spot competitive advantage, which comes in so many forms on the internet. But at the end of the day, it’s very qualitative. I think a lot of investors are very quantitative and they look at businesses like spreadsheets. I think it’s much more qualitative and it comes down to the fact that businesses at the end of the day are collections of people and people are complicated. So there’s a lot of assessment to do around that.

Alex Moazed (26:39):
Absolutely, and you were talking about Dribbble, the network effects, the stickiness of that business. Is that something which has been much harder to find that you’re seeing? These community driven businesses where there’s two sides to it of some sort or another. Is it just a matter of where you look, it’s industry or vertical dependent, or it’s really just all bespoke? Any kind of trends you’ve seen change, as it relates to that stickiness factor and how it manifests itself?

Andrew Wilkinson (27:14):
Yeah, I mean I think the biggest question mark at this point is the crypto stuff, which honestly I largely dismissed. I was quite interested in Bitcoin almost 10 years ago, and I think it’s quite fascinating as a technology what we’ve been waiting for it to do, be fully baked. I don’t know if it is yet, but I think one of the really interesting things to think about as a platform owner is the first time ever with the idea of issuing crypto tokens and all this kind of stuff, you can create a community where the owner of the platform and the users are directly aligned. What I mean by that is, if you were an early driver on Uber, let’s say that you were one of the first 10 drivers, you got paid $30 an hour, and that’s the only way you benefited, whereas Uber benefited massively from you being on the platform and they all made billions of dollars. So I think with what’s happening in crypto, there’s going to be platforms that spring up where the early users have an incentive where they can get rich by playing a part in the community.

Andrew Wilkinson (28:24):
So as the owners of Dribbble for example, we’re thinking a lot about how we can be defensive there because somebody could probably create a Dribbble competitor. Normally, let’s say today someone started a Dribbble competitor. Well, I’d probably laugh, I’d say, “Okay, good luck getting all of these users to come over. I don’t know how you’re going to convince the top 1,000 designers in the world to go somewhere where there’s nobody looking at their work. The reason people go to Dribbble is they like the community that’s already there, there’s a network effect. People get massive exposure, they have millions of designers that check it daily. So why would they move over to this new platform?”

Andrew Wilkinson (29:09):
The difference would be that if they created a new Dribbble that’s based on a crypto token, you can go to all these 1,000 designers and say, “Look, I’m going to give you this token and as the platform becomes larger and larger, the token is going to become increasingly valuable. So you can get rich along with us, the platform owners.” I think that is a big open question right now of whether or not the platform moats will continue to be the shark infested moat that they’ve been, or they become a little puddle. I don’t know, that’s the big question mark for us, and we’re really bashing our heads against this and thinking about it long and hard. I don’t know, I mean, what’s your take on that?

Alex Moazed (29:56):
Yeah, I mean I think what you’re saying there is, by providing not literal equity but if you broaden the conversation to the scene to say a bigger debate in society is, how does society more broadly come along for the ride of growth and equity versus just… in this instance it would be the founders and the early employees that get a lot of that literal equity. But can crypto and alt coins and tokens and all of these things help provide a more equitable environment so you have utility based tokens that now the initial users are just naturally going to amass a bunch of those. Presumably as the rise of the platform grows, then those tokens will also increase in value. Is that a strong enough monetary subsidy that it could help to attract or tip the scale penetrating certain network effects on either the demand and or the supply side, in some of these really winner take all type of communities.

Alex Moazed (31:12):
It’s a fantastic question. What is to stop… well, tech monopolies are a completely different story, but what would be to stop a Dribbble from issuing its own coin and trying to get out in front of that, or maybe that’s exactly what you’re considering, right?

Andrew Wilkinson (31:29):
Well, this is exactly what we’re thinking about. We’ve looked at everything from NFTs for example. Again, these are all things that there’s a huge hype cycle around them right now. They’re digital Beanie Babies at this point, and I don’t want to pay them too much attention but we’ve contemplated for example, we’ve got the world’s most creative designers, I’m sure they’d want to make digital art and sell it on the platform. Is that something we can do? The beauty of a business like Dribbble is it’s, what I call an airport business. What I mean by that is, it’s a place where if you want to fly somewhere, you got to go to the airport, you got to hang out there for at least an hour and wait in the lobby before flying to your destination. Dribbble is a place where people naturally congregate and if you want to congregate with the world’s best designers, you go to Dribbble.

Andrew Wilkinson (32:18):
So just like an airport, there’s a whole bunch of different stalls and you can choose who to rent those to. You can give them to a taco shop, a massage parlor, a wine bar, whatever it is.

Andrew Wilkinson (32:29):
So on our platform, we can continue to roll out and add on new revenue lines. We’ve looked at NFTs, we’ve looked at issuing tokens partly as a defensive mechanism. I think the concern is that we could ruin the platform and piss a lot of people off by adding a financial incentive to it. I think right now, people go to Dribbble because they feel good, they want to get feedback on their work, they want to see what’s trending and find the new design. Kind of like, where design is going and stuff. I think as soon as you start attaching monetary stuff and weird incentives to that, it can ruin a community. So we want to be very, very thoughtful but we’re in a very privileged position to be able to add that kind of stuff if we want to.

Alex Moazed (33:12):
Yeah, I had another guy on the show somewhat recently, he founded a company called Library and they have a content platform, like a YouTube competitor, called Odyssey. So you can get the Library coin, their blockchain protocol allows you to basically create a YouTube clone and Odyssey is their vertical application built on top of this protocol. The Library token helps to power all of that and all this kind of stuff, and it’s the top 5,000 website in the United States. They’ve raised $7 million and then they got subpoenaed by the SEC because the SEC came after them and now it’s spilled over into the public and we had them on the show to talk about it. But the SEC accused him of profiting off of their coin and then that’s frozen their ability to raise money and all these kinds of things, so-

Andrew Wilkinson (34:13):
This is a question, is what’s the difference between a coin and a marketable security? So if I issue equity, could I just issue equity to all my early users? The answer is yes, but the paperwork would just be a complete nightmare, and it’s not liquid and it’s just a total pain in the ass. I think the liquidity and the decentralized trust is what’s so interesting. But the most interesting startup I’ve seen that embodies this new idea is Braintrust. Have you seen Braintrust?

Alex Moazed (34:45):
I’m looking it up.

Andrew Wilkinson (34:46):
So, Braintrust is basically Upwork. So you go to their website and it just looks like a better designed Upwork. Upwork is basically a marketplace for freelanced work, so you can go on there and hire a developer or an assistant or whatever you need, knowledge work. You go to the website and it just says access the world’s most talented freelancers, no middleman, no markups, no hassle. I saw that and I went, well, how is there no middleman or markups? They must be charging fees. What’s really fascinating about this is that they aren’t. So I started digging into this and essentially what they do is they issue tokens to everybody involved. So when a customer comes on, the people who match them to talent are given a token, and then all the users or all the providers are also paid in this same token. So the idea again is that you’re aligning incentives amongst everybody and that by doing so, you can essentially remove fees. So it’s just very, very interesting. I don’t know if this going to work, it’s a hard model, obviously, doing supply and demand. But seeing stuff like this is quite interesting.

Alex Moazed (36:04):
Yeah, and I think… well also, a couple things. One, it’s a very scary association the SEC made, because they are essentially treating alternative coins as a marketable security. That was the big wow when we had Jeremy on the show, even though they never did an ICO or anything like that, but that’s a whole other topic.

Alex Moazed (36:27):
For this, I think yeah, if it’s inherently intertwined to what I would call that core transaction, that compensation workflow, if you can use the token or the coin as just a seamless and mechanism to provide that compensation back to the producer in this circumstance, then I don’t… maybe what you’re getting at is if it feels tacky. It’s like Facebook putting ads on Facebook when they are expanding to Ivy league schools. It needs to be baked in just like any product feature or product add-on, that it feels a part of the experience and it was destined for that use case. So I think maybe that’s the silver bullet, is if you can figure out a seamless way to weave it in, then the value prop clicks and it doesn’t detract from the product and the experience that users get when going. You can hopefully deliver on the premise that hey, we’re going to have a more equitable future for everyone, whether you’re a founder, employee, or early user, we’re all going to share in this upside.

Alex Moazed (37:45):
So maybe these guys will be able to thread that on through, but I think conceptually it makes sense, with the caveat being if you are going up against a tech monopoly, then all exceptions and caveats now apply. You’re in a completely different battlefield than normal platform wars.

Andrew Wilkinson (38:13):
Well, and I think the thing everyone needs to remember is all those platforms have the option to do the exact same thing. I think it’s a feature, not a product, and that if there’s dinosaur tech companies who can’t adapt with that, they might be disrupted. But at the end of the day, if you have the largest community of people on a certain area or you have just a fire hose of traffic or whatever it is, you can always layer this in.

Alex Moazed (38:37):
Especially if you’re inherently touching payments or something related to money anyway, then it can be more seamless, more appropriate feature that fits, as opposed to standing out like a sore thumb, so. But I love that vision. I never really thought about it that way, on how crypto and alt coins and tokens can be that monetary differentiator for the whole community, which isn’t the be-all, end-all, but certainly could be a key differentiator in the early days.

Andrew Wilkinson (39:18):
Well, the thing that made me register it was there was this thing called BitClout. Have you heard of BitClout?

Alex Moazed (39:24):

Andrew Wilkinson (39:25):
So basically what they do is they… almost like a clone of Twitter and the idea is that it’s all on the blockchain and you basically can bet on people. So you can buy people’s coin. So I could buy Alex coin and you can Andrew coin, and as I get more followers, my coin is more valuable. What they did is they scraped Twitter and they said, “Look, Andrew, if you come over here, you have $70,000 worth of BitClout coin.” I went, oh my god, well, because I have 150,000 followers on Twitter, they’re going to give me all these tokens, and all I have to do is Tweet it out. So I Tweeted it out, I move over to this platform, and I was like, wow, I have $70,000 worth of liquid cash, kind of. Now, they’re not allowing people to withdraw yet but if this keeps going, probably would be able to withdraw.

Andrew Wilkinson (40:24):
I didn’t start using the platform because it wasn’t that relevant to me but I could see how attractive this would be if I was a top Reddit user and some decentralized version of Reddit came along and said, “Hey, Andrew, if you move over, we’re going to issue you $100,000 worth of tokens in our new Reddit clone.” I’m going to move over and I’m going to have a really big incentive to try and get everyone I know to move over because the more people that buy in, the more valuable my tokens become. So as an incentive’s problem, I think it’s fascinating.

Alex Moazed (40:56):
Well, and it’s like what Jay-Z tried to do with TIDAL. He just didn’t do it in a scalable way, but right? That was the whole idea. Hey, if you’re a key producer, come on over and we’re going to help bake you into some of the upside here.

Andrew Wilkinson (41:11):
Well, and I think with NFTs what will be interesting is not what it is right now, which is a virtual Beanie Babies, but I think it’ll be the idea of creating something that is truly unique like a song, and then Spotify… I hope what’ll happen is that Spotify and other platforms will basically say, “Oh, every song that we have is in an NFT and that it’s community owned or artist owned,” because if you think about about it, imagine if Taylor Swift said, “You know what? My next album, I’m not going to use Columbia Records, I’m going to go to my fans and I’m going to raise $20 million for an NFT. That NFT is going to be my album. Then all my fans are going to own a chunk in my album.” You almost have a publicly traded stock for her album. Then as Spotify plays it more and more and more, all the royalties flow to Taylor Swift, but they also flow to her fans and all the owners of the NFT. I think that is really interesting.

Andrew Wilkinson (42:08):
I think what’s interesting about crypto is the idea of a market for everything. A marketable security for almost every conceivable thing, but again, I think we’re probably five or 10 years away from that actually being fully baked.

Alex Moazed (42:21):
You know who is literally getting hives right now listening to this conversation? The regulators. The prospect of this new future and this conversation especially, if they’re listening in. Yeah, they need to go have a couple drinks after this.

Andrew Wilkinson (42:44):
Oh yeah, I mean I think it’s going to be impossible, it’s going to be nailing Jello to the wall. There’s just too many markets to regulate, because that’s the real distinction is, how is it different? How is BitClout issuing me $70,000 worth of the Clout coin different than them issuing me stock? In reality, it’s privately trade-able, it’s really publicly trade-able, there’s a public equity market. It just happens to be called a blockchain.

Alex Moazed (43:13):
I mean, it could be a great way to solve that age old question between creating a more equitable environment for society and how does everyone participate, as opposed to a select few? Maybe this is the mechanism that decentralized mechanism to bring that about?

Alex Moazed (43:32):
Closing thoughts here, Andrew? What else is on the horizon? You take a longterm outlook like Buffett. You look a decade at a time, as Ackman has advised. Besides crypto and decentralized finance, any other big mega trends that you’re looking to latch some barnacles onto?

Andrew Wilkinson (43:57):
Well, I think one is at a time when everybody is going crazy and bidding stuff up and everyone’s saying this time it’s different. I think it’s important to take a breath and stay calm and sit on your hands and only do deals when logical. So that’s been quite [inaudible 00:44:18] frenzied market, trying to figure out how to be a market participant. Where we’ve settled is that, at the end of the day unless we see something that’s a fat pitch, we’re not going to swing. We’re really just focused on optimizing our existing businesses and building up cash and waiting for the right opportunities.

Andrew Wilkinson (44:35):
We’ve got a couple quite interesting acquisitions that we’re working on right now. I don’t know if they’ll close, but if they do, I’m really over the moon about them. Can’t talk about them yet, but otherwise, it’s just really waiting and sitting and trying at the same time, being a skeptic. I’m very much a skeptic of this current craziness, but at the same time, trying not to throw out the baby with the bath water. So, still learning about crypto and seeing where the value might lie and how it could be disruptive to our businesses. So, a lot of sitting on my hands and a lot of reading.

Alex Moazed (45:06):
Love that, and I couldn’t agree with you more. I mean, if you’re… I mean, obviously it depends on the time horizon but yeah, what we see going on with a lot of public equities and what happens when you inject as much money as has been injected into the economy, the money system, a lot of irregular activity these days. Being extra careful about what you get into and at what price you get into today, certainly sounds like good advice to me.

Alex Moazed (45:39):
Pleasure having you on, Andrew, such a delight hearing some of your insights and what you’re looking at and how you’re thinking about it. We wish you the best and thanks again for coming in.

Andrew Wilkinson (45:49):
Thanks so much for having me, Alex. Talk to you soon.

Alex Moazed (45:51):
Okay, that was Andrew Wilkinson, a real treat. We’ll talk to you later, that’s it for us today on Winner Take All. Thank you.


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