1/🧵Lately, I've been thinking about mints, NFT project finances, and how far short the NFT space currently falls from what it should be, given it is the spear-tip of web3 and the first impression many will have of the entire movement.
— Daniel Tenner (swombat.eth) (@swombat) November 16, 2021
It's pretty dire, really.
2/This was brought on by joining, and becoming aware of, the innovative smart contract feature that @CuriousAddys have implemented as part of their mint.
— Daniel Tenner (swombat.eth) (@swombat) November 16, 2021
If you're not familiar with it: for the first 100 days, anyone can return their NFT and be refunded their mint price.
3/Although @CuriousAddys is not perfect by any means, this is such a strong show of confidence in the project, and such a strong message, to the market, such a strong guarantee - that I found myself wondering why other projects don't do that too?
— Daniel Tenner (swombat.eth) (@swombat) November 16, 2021
4/There are good reasons why other projects don't offer mint refunds. Or rather, there are reasons, but they're generally pretty bad.
— Daniel Tenner (swombat.eth) (@swombat) November 16, 2021
The first and worst reason is: because they see mint as a payday.
5/I've argued before ( https://t.co/sKExLD0PoG ), and still believe it's a good lens, that an NFT Project is a lot like (though not identical to) a startup, and minting is a lot like raising funds from investors for your vision.
— Daniel Tenner (swombat.eth) (@swombat) November 16, 2021
6/A startup founder who used the money entrusted by investors to give themselves a big paycheck would find themselves in hot water very quickly.
— Daniel Tenner (swombat.eth) (@swombat) November 16, 2021
Yet somehow that's the norm in the NFT space. For now.
7/Obviously, if you've raised 3 million dollars from your mint and you use that money to pay yourself and your cofounder a million each, leaving $1m in the kitty... you can't possibly offer that mint guarantee. You simply can't afford it.
— Daniel Tenner (swombat.eth) (@swombat) November 16, 2021
8/Another bad reason why NFT project founders won't offer that guarantee is if they are basically not serious about the project, or only semi-serious.
— Daniel Tenner (swombat.eth) (@swombat) November 16, 2021
This is another place where maybe some useful patterns can be imported from the startup world.
9/Investors in startups know that not everything works out, or at least they should.
— Daniel Tenner (swombat.eth) (@swombat) November 16, 2021
But after they give you $500k to go and work on your vision, they expect you to give it your damn best. Not to make a half-hearted attempt and say "oh well it didn't work out".
10/A founder how takes money from investors, works their ass off to make it work, and fails, will probably raise again.
— Daniel Tenner (swombat.eth) (@swombat) November 16, 2021
One who has a half-assed go at it will never raise again from any sensible investor.
11/Another reason I imagine why NFT project founders don't offer this is because they don't really know what they'll be spending the money on.
— Daniel Tenner (swombat.eth) (@swombat) November 16, 2021
Startup pitches usually require the founders to at least have some idea what they want to spend on, and to explain that.
12/If you don't have a clear plan for how you'll spend the money, you can't manage the funds of the startup to make sure you can actually honour that smart contract's guarantee.
— Daniel Tenner (swombat.eth) (@swombat) November 16, 2021
13/Even more than plans, you also need good money management skills to go with them, to ensure that the project grows at a rate that generates enough funds from the secondary market to not overextend on its expenses, while still spending on growth.
— Daniel Tenner (swombat.eth) (@swombat) November 16, 2021
It gets complicated.
14/Many NFT projects are run by people who have never run a business before. I think that's great. I want way more people to be entrepreneurs. But it also comes with downside that they often don't know the basics of running a business, let alone have advanced cash mgt skills.
— Daniel Tenner (swombat.eth) (@swombat) November 16, 2021
15/And often those NFT projects seem kind of disconnected from the startup world. That's ok, but they miss out on a lot of things that are obvious to startup OGs who have broken their teeth time and time again on mistakes that are now obvious to them.
— Daniel Tenner (swombat.eth) (@swombat) November 16, 2021
16/This is all ok. It's life. It's change. It's how the world renews itself, by reinventing the wheel over and over again.
— Daniel Tenner (swombat.eth) (@swombat) November 16, 2021
But it doesn't have to stay that way.
And I don't think it will stay that way for too long.
17/NFTs are such a powerful funding model for startups that, unless, or perhaps even if the SEC/FCA/ETC try to shove sticks in their wheels, they will slowly but surely become adopted by ambitious founders who want to build awesome things.
— Daniel Tenner (swombat.eth) (@swombat) November 16, 2021
18/As I've argued before, NFT-based fundraising has the potential to wipe the floor with the Angel->VC->IPO pipeline that has dominated the startup world for several decades. And good riddance. It's better for startups *and* for investors!
— Daniel Tenner (swombat.eth) (@swombat) November 16, 2021
19/So, back to that confident @CuriousAddys contract.
— Daniel Tenner (swombat.eth) (@swombat) November 16, 2021
I think we're going to see more features like this in NFT fund-raises. Maybe not exactly this, there are infinite variations to try.
But mint process that show confidence and commitment are likely to be the future.
20/What I would like to see, and hope to see coming in the near future, to deliver on NFT fundraising being truly aligned with web3 includes:
— Daniel Tenner (swombat.eth) (@swombat) November 16, 2021
21/
— Daniel Tenner (swombat.eth) (@swombat) November 17, 2021
- Proper, upfront transparency about how the project intends to spend the money raised. It is weird and unhealthy that a project can raise $3m without making any sort of clear statement about what it intends to do with that money.
22/
— Daniel Tenner (swombat.eth) (@swombat) November 17, 2021
- Proper accounting of how the money is actually being spent! Given that all the wallets are public, this should be a given, but for now it is still left to project members who act as Ether sleuths and find that "oh, the project wallet just transferred 50 eth somewhere!?"
23/Accounts don't need to be updated every day... but it is not unreasonable for investors, even if they invested by buying a jpeg, to expect to have some kind of update on what the project is doing with its cash pile.
— Daniel Tenner (swombat.eth) (@swombat) November 17, 2021
24/
— Daniel Tenner (swombat.eth) (@swombat) November 17, 2021
- Commitments by the project founders that show that they are in it for the long run. @CuriousAddys has pioneered one way of doing that. There are likely others, especially with all the creativity of smart contracts available to play with.
25/I get that in the crypto world, some people will want to remain pseudonymous.
— Daniel Tenner (swombat.eth) (@swombat) November 17, 2021
Fine.
But if you're not going to even commit your valuable (or perhaps worthless) personal reputation on the project, it should be structured so the chance of you rugging is zero.
And it can be.
26/To concludeloop back at the beginning of the thread... there are many ways NFT Projects could build trust and confidence.
— Daniel Tenner (swombat.eth) (@swombat) November 17, 2021
Right now, in the wild west of anonymous, opaque, ruggable NFT projects, that's not the norm.
It should be.
And, I like to believe, it will be.
gm & gl