If an NFT-backed online club is actually run honestly, with basic competence, and a decent vision, and starting roundabout now, it is very likely to succeed. I am extremely bullish on clubs that show certain characteristics...
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
(relevant read: https://t.co/kzuL1oQpmE )
Why?
👇
Let's say the project has a reasonable, humble mint of 0.05 - on the lower end these days. Many hyped projects raise more than that so it's reasonable.
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
For a 10k project, that's 500 Eth raised. At today's prices that's over $2m.
That's a $lot for a startup with ~0 fixed costs.
What if the mint doesn't sell out?
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
As long as the mint doesn't sell out, founders shd keep refining their pitch. If they can get pitch/interest right, at some point it will catch enough ppl who want into the club, and soon after that investors will fomo in.
Bear in mind that in a club, investors are actually dead weight. They don't really want in the club, they just want to make money. But they do provide that initial budget and liquidity.
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
So what does the initial $2m mint budget buy a project?
Well, let's say there's 5 founders - seems a typical number for NFT projects. Could be less or more. Adjust numbers accordingly. Let's say they pay themselves a very generous $10k/m each. That's $600k/y. Let's add $400k/y for the project to pay for things.
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
On this $10k/m figure - yes, I know costs vary a lot. If you're in the Bay Area or Switzerland, it may not be enough. In most of the world though that should be enough to work on your passion project!
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
In London, where I live, $120k = £90k - a very, very good yearly salary.
The key point is: a full 10k mint at 0.05 (or higher) should provide an NFT club project with at least a couple of years of runway, especially if you include future secondary market royalties.
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
It buys the team a good chunk of time, that a good team ought to be able to use well.
Such a club looks like a bit like a startup with:
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
- a core, excited, evangelical user bas
- some form of early product-market fit
- a 2+ year runway to do something with the above
- operating in an exciting, growing, uncharted market
That's a *really* strong position imho.
Can an NFT club still mess up with such a great start? Yeah ofc. They can mismanage the growth or the vision and start bleeding members that should be sticky. They could turn out to be racists (!). They could steal their own project's money and buy Lambos. Those things happen.
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
But if they are genuinely, honestly working on the project, having literally years to find their next level of product market fit, starting in such an early, undercrowded market... their chances are *really* good.
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
So what do I look for, specifically, to make me more bullish?
The useful framework that can be carried over straight from the startup world is: Team, Market, Product, in that order.
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
A with a great team, an NFT club that's got a market will probably get somewhere really good eventually.
With a broken or incompetent team, it won't.
#1: I want a sense that the team in an NFT project is committed for the long run.
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
Simplest (but not only) way to achieve that is for them to be properly doxxed, committing their personal reputation into the project. Examples: @CuriousAddys , @ExpansionPunks .
A less immediate way to achieve that is to convey it in other ways. I had enough conversations with @crypto_coven about what they would do if mint didn't sell out that I believe they are in for the long run. @NFTLlama's long term passion and commitment are palpable.
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
Less commonly, it is also possible to commit via smart contracts - @CuriousAddys is the only example I know of for now, with the 100 day refund. That makes them super-committed to achieve something in those first 100 days. I'd like to see more of this!
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
#2: Also part of team: NFT club founders should be responsive to feedback and willing to leverage the community's co-creative input.
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
Let's untangle that.
A thing I do when evaluating startup founders to invest in is point at some poss issues and see how they react. In startup lingo, I'm checking for "coachability".
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
Don't invest in founders that are not coachable. They'll make all the stupid mistakes instead of the clever ones.
In the NFT space, coaching the founders is not an option - but instead of a few angel investors they have a large and committed community to draw from.
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
That is, if they are open to it! Many project teams will sit in their ivory tower and maintain the illusion of control instead.
Unlike a typical startup, an NFT club has an engaged fan base from the get go. They should listen to those, invite them to co-create the project, and perhaps trigger a creativity explosion at some point if they're lucky. (cf https://t.co/b0pfAa315U )
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
NFT club with a strong team: 1x
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
NFT club with a strong team that engages their community as evangelists: 10x
NFT club with a strong team that also leverages their community as co-creators: 1000x
So I'll observe, and offer some input, and see how other people's input is received, to figure out if they're open to their community. It's not something I can just ask directly. I need to hang out in the Discord a bit and watch and test, and make my mind up.
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
As an example, when I mentioned on @CuriousAddys that I wrote twitter threads, I immediately got roped into writing a thread for them. Bullish. @Llamaverse_ recruited me on the alpha council and coopted (in a friendly manner) my threads as part of the Llamaverse value. Bullish.
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
#3: Now moving to market. Is there a clear vision of who the ideal member for this NFT club is?
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
This doesn't need to be explicit, but I need to get a sense that they understand who they're trying to attract. Otherwise the club won't be sticky enough & club dynamics will fail.
What's the market for this NFT club? Is it big enough? Are they likely to have money to buy this? Are there enough of them in the crypto space? will there be soon?
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
None of these questions can be answered unless the ideal member is clear.
This can be implicitly clear if you pay attention. @crypto_coven doesn't outright state this, but:
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
- they have a tarot card channel
- talk about star signs and archetypes
- have witchy lore
- art appeals to witchy ppl
Ideal member is clear even if not explicitly stated.
Unless it's clear to me who would want to join that NFT club, I won't consider it a viable investment. I might still buy in for other reasons (e.g. trading opportunity), but not from an investor perspective.
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
#4: NFT clubs also need a compelling reason why club members want to stick around. This is the other side of the "market" point.
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
The club knows who they want: but will the ppl they want actually have a reason to stick around?
There need to be either a single really compelling thing, or a lot of softer things that make the space harder to leave without a feeling of loss.
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
One thing that's often parroted as "the reason to stay", though, is "the community" - and imho it is not enough.
"Community" is too vague as a benefit. What's good about this community? I have literally been in 100+ online communities since I first joined a message board in 1996. Most of them had good "community", and yet I left many, many of those soon after entering.
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
What made some of them worth sticking with for a while:
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
- shared interests in some kind of actively discussed task
- strong individual benefits from being an active member
- online mapping of an offline group
- an actual fun game being played
...
Web design message boards helped me get better at web designing.
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
An club for NFT investors teaches me trading skills and gets me other alpha.
My Hacker News profile likely helped me launch my third company.
MUDs & WoW were actually fun (...ish).
Ironically for projects that claim "community" is their strong point, most projects I'm in have a good enough community.
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
Community is a hygiene factor. It's table stakes.
If you don't have a decent community it's like if you have a buggy mint contract.
If you want your club to be sticky, you need something that makes ppl really feel like they'll lose out on more than just some chummy Discord banter if they leave. You don't even need an NFT for that - there are many free Discords with great fun folks on them.
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
I've left countless communities where I had "frens" and not looked back. There are always more communities, more friends to be made. It's not exactly hard to find cool online places to hang out with ppl in this world. "Community is not enough to make a club, imho.
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
What is enough to fulfil this side of the equation is a few (or even just one) hard benefits, or many softer benefits.
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
For example, for an investor group: alpha; WLs; calls; early info; education; moral support, reputation. Those add up to make something hard to leave behind.
And that's it for my list of criteria for investing in an NFT club. Team and Market r covered. Nothing about product. Why not? 2 reasons:
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
1) the product is clear: it's a club. It's a pretty straightforward product at the end of the day, though there's millions of ways to slice it
2) if these first two are sorted, and they have a few million dollars/couple of years to execute, it's likely they will built out the product right, even if the current product proposition is completely ass backwards.
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
Remember: A great, committed team in a great market can execute to a place of excellence. A b0rked team with the best product ideas couldn't iterate their way out of a wet paper bag - they'll get bogged down in nonsense and focus on all the wrong stuff. Team -> Market -> Product.
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
To close this thread: I would love to see more excellent clubs & invest. I also would ♥ if they made my job easier by being clear about those points (commitment, openness, vision, ideal member, membership benefits...). As a bonus, that will also reassure ideal members to join!
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
TL;DR:
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021
- An honest club has 2+ years to execute.
I invest if:
1) Team is clearly committed
2) Team is open to feedback and community co-creation
3) Ideal member is clear and a compelling market
4) Benefits are likely to make the club membership sticky
gm & gl
PS: Disclosure: I hold some of @CuriousAddys , @crypto_coven , @Llamaverse_ and @ExpansionPunks , and am listing items from 2 of those at the moment. They are examples I'm familiar with, not calls. DYOR before buying.
— Daniel Tenner (swombat.eth) (@swombat) December 13, 2021