Cryptocurrencies

The everything disruption

I wanted to take a moment to write about the disruption which is coming to the world of stocks and stock options.

Let’s stop pretending stock options have value anymore

If you think about it, the way the tech industry builds companies is broken and everyone knows it. There is an incredibly long and complicated ramp from startup to IPO which involves many convoluted stages of dilution and funding which frequently leave founders and employees with next to nothing. 

I personally worked for a startup which sold for $200 million and most employees got less than $10K out of the deal. The CEO of the company, who built it up to 200+ people from the ground up over the course of a decade, didn’t fare much better.

I have had my share of stock options. Most of them involved signing hundreds of pages of abstract legal mumbo jumbo. Why all the convoluted language? Mostly ass covering and legal fraud masquerading as a work of genius you are “too dumb to understand without a law degree so don’t ask.” 

All of this paperwork used to serve a purpose: To guarantee and secure a complex financial exchange. In our new world, we can replace all of that with simple, verifiable public encryption based currencies. There is no need to sue: The math is public and represents the entirety of the contract.

It wasn’t always this way

 There was a time in the 1980s – 2006 when people used to get rich collecting stock options, but in my experience this is no longer common. Investors, in general, frown upon “waste” which comes in the form of founders, executives and employees making millions from an acquisition or IPO.

The reality is: Most startups can get away with simply paying market rates for employees, so they do. Why make them rich if they are content with $200K?

What comes next

With advancements in cryptocurrencies – stocks, IPOs and stock options are looking quite primitive. In fact, they might be worse than primitive – They seem actively engineered to steal value from creators and redistribute it to investors and lawyers. 

A few obvious questions which we no longer ask:

Why wait to go public? Why have multiple rounds of dilution and investment? Why have many different investment vehicles versus only one? Let’s call these steps what they really are: Insertion points for financial parasites. 

Over time, we have become convinced all these things are needed due to market inefficiencies which no longer exist. The reality is: None of these steps or gatekeepers are required.

The new crop of startups don’t need to wait to go public and don’t need to pay lawyers and don’t need to take any investment: They go “public” first by offering a Token and then skip all the other steps.

As a result, Communities are now king. If your startup can attract a community to fund your project, you have everything you need.

I’ll try to demonstrate my case by comparing two stories.

Exhibit A: Expedia

Expedia is a global marketplace for many various travel products, it employs 25,000 people and has a market cap of $25 billion. What are all those people doing? Who knows, I imagine they are generally “making travel stuff happen.” Whatever these 25,000 employees are doing (worth $1 million each to Expedia per year), it sure involves a lot of expensive glass buildings. 

Expedia launched in 1996 and IPOd in 1999 and was originally a division of Microsoft.

Exhibit B: Travala

Travala (https://www.travala.com/) is a new travel startup which launched with the backing of Binance (the world’s largest cryptocurrency exchange). Travala was founded in 2017, they offer travel including “Offers for 2,200,000+ properties covering 90,124 destinations in 230 countries and territories, and with prices up to 40% cheaper than mainstream travel booking platforms.

You see, Travala doesn’t need to hire 25,000 people. They just need software, a handful of employees, a token and a community of customers.

I am curious how many lawyers are even involved.

Unlike Expedia, Travala is predominantly focusing on travel funded by cryptocurrencies. Also unlike Expedia, Travala has not IPO’d and probably never will because they launched a Token  (AVA) which is now worth $200,000,000. Also unlike Expedia, Travala has 50 listed employees on LinkedIn. 

Doing the math here: Travala is currently valued at $4 million per employee. Expedia is worth roughly $1 million per employee. 

And if Travala’s token continues to rise, we might see multiples much higher than this.

Tokens kill four birds with one stone

The Token Travala has launched is deeply integrated into their platform and offers their customers incentives and benefits for using their site repeatedly. AVA is a stock, a stock option, a payment method and a loyalty reward for customers all in one. You can even buy, trade and sell them if you want or use them to pay for trips.

On the surface this looks like just another travel competitor with a reward program, if you look deeper: Travala is a profound disruption, not on the user interface side, but on the financial side. Of these two “innovations,” the “financial innovation” is vastly more important.

Anyone can launch a travel website…but something much bigger seems to be happening here. 

My view

In my opinion, we are about to see a tremendous disruption that will impact many areas:

  • Stocks, Shares and Stock Options will be completely replaced by tokens 
  • Startups and organizations will go public immediately rather than wait
  • Most of corporate / legal finance will be revealed for what it is: Legal Fraud which deliberately obfuscates the simple
  • Many stocks in the stock market will face a distributed Token-based competitor with 1/100th the employees
  • Investors, Regulators, Lawyers, Financiers, Venture Capitalists will be replaced with… *poof* nothing – They were never needed in the first place!
  • Communities will become #1: If you are able to attract, reward and incentivize a community, you are going to win big in this new world

This seems like a stretch, but in coming years, I am expecting to be right more often than I am wrong. 

Don’t get me wrong, regulation will catch up, but it must evolve drastically first.