A whole lot of people are seeking knowledge around this blockchain. Tracy and Monica talk about business plan models for blockchain. Learn more about blockchain as they delve into the technology and all its complication and uses. Learn how you can add a layer of trust to your business model by adding a blockchain component to it to make it extra special.
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Blockchain Business Plan Models
We thought we’d talk about business plans for blockchain projects and for blockchain businesses. This is complicated.
It’s complicated and it sounds so boring. It’s like let’s sit down and talk about white papers. That’s the blockchain specific equivalent. They’ll say, “I read your white paper.” I’m like, “Did your eyes bleed? Because my eyes bled trying to write it.” I’d feel the same way about business plans.
It’s the same thing. It’s one thing when you’re like, “I want to talk about pitch decks. They sound a lot more fun. They sound a little bit more fun than a business plan.
At least you can make pictures.
The reality is without a business plan, you can’t do the pitch deck.
Then with the pitch deck, you can’t get the investment and then you’re stuck in this cycle of like, “Is it going to happen or not?”
The reason we wanted to bring this to you is because Monika has done hers because she’s in the capital raising process. She’s pitching these things. She’s out there. That’s underlying it. We want to talk about what she did, how she did it and what the feedback has been. The mistake she may have made or ways that she wished she had done it differently or something like that. I’m in the process of building mine. I’ve been going out there reaching out to like who do I trust to help me build this plan and what format should I be using? Is this information totally out of date because I got a business plan format from someone and I go, “This looks like the thing you can download from Score.” Is that still valid? These thoughts are going through my mind. That’s why we want to talk business plans because while it may sound boring, there’s a lot of people out there seeking knowledge around this.
A lot of times business plans are an indication that someone doesn’t know what they’re doing because if it all makes sense on paper, a lot of times it’s like you pulled this out of thin air. You stuck it in an Excel spreadsheet. It’s like it’s all going to go that way. There’s never has ever seen a business go exactly the way that I forecasted that I planned, ever, not once, never. Maybe if I was on a Tuesday forecasting for Friday, that might have been asking about it.
The financial is not only part of the business plan. That’s what makes a good business plan. Let’s talk about what you did for Rise Markets. What did you build for the business plan there? Did you build a full document then full financials? What’d you built?
There have been so many things that I’ve built. To start from the very beginning, this is my fifth company, the fourth that I’ve founded and fifth that I’ve run as CEO or at the helm. One of them was at an arts-related business, so it was more of an executive director is my title. It was the same thing. I was a charge and I had to be on the hook for it. For this one, it was such a big departure from what I’d done before. I’ve always invested in real estate myself. I was a real estate agent. I worked with developers. It had been a long time since I’d run a tech company. When I’d run the tech company, that was the one that I didn’t found. I didn’t do all of these early forecastings. The one that had the founder that did find the one tech company that I got to be closely involved with, I wasn’t there when they were founding it. I didn’t watch them do that. They didn’t raise any money. They took their skillset and then scaled it out until they had a big services-based business and expanded to products.
I was there for later stage stuff. At no point that I have the need to write out a business plan specifically, I had the need to write out a marketing plan, how I was going to go to the market with what I had. I had the need to figure out how much debt I could accrue and how going to afford it all. I never went to raise money first so they never had to convince anybody of what I was doing. If I was going to fail, it was all on me. If I was going to succeed it was all on me, which was great. I started with financial models. I didn’t write this for anybody else. I wrote it for me to go, “What is the internal rate of return on this product, of this type of real estate asset and the way that I’m looking to change the way that it will operate and function.”
You started in the numbers which is so interesting because you are such a creative person. That’s what I was thinking. I would expect you with this visualization.
To be totally fair, sixteen years ago I was a working artist full time and that’s when I dreamed up Rise Markets. I thought somebody with an MBA would go and do it.
You’d been visualizing it a long time.
I did visualize it. I started sixteen years ago while I painted my paintings. When you have a painting and you get stuck on it, you can turn it upside down and see it again. It’d be like, “I get where. It’s not working,” and then put it back. It’s not like emblazoned into your irises anymore. When I was thinking of Rise Markets, which I haven’t had a name for it. I wanted to be able to buy the building with my neighbors at the time and bring in other investors. I didn’t know how to do formalized fractional ownership. It wasn’t common. I took a brown paper bag and I cut it up until it was one big piece. I’m like, “That’s free butcher paper.” I do this all the time. I’ll get my groceries in brown paper bags on purpose so I’ll have all this extra paper. I would tape it to the wall next to my painting.
I would paint my painting and that’s like my right brain activity. I would sit and think about how could I turn it upside down? How could the owners and the tenants be the same? How could I figure out fractional ownership? What are tenants’ rights? What are the landlord incentives? What are tenant incentives? I figured out Rise Markets. How to be a tenant and also continue paying for things. I’m paying towards equity. I figured out, “Anybody, any of my friends might help me buy this building.” I went beyond people that would occupy space who would want to invest in it.
You were running through models on your head and on paper and that’s where sometimes people get stuck in and they’re like, “I’ve got this plan. I’m going to do this one thing.” They start writing it out. That locks it out.
You’ve got to let it percolate for a while. I percolated it for a little too long because I kept thinking someone else would do it. It’s like I have a painting and I have this model. I was like, “If I don’t make this painting, someone else is going to make it.” That’s the way art works. It’s not like the painting belongs to me. It belongs to who makes it happen. If I don’t make this happen, someone else is going to come along. I’ve seen my own paintings in other galleries enough that like, “If I don’t do that, I’m going to see somebody do it because enough people are thinking the same thought.”
I thought the same is true for business. It is pretty true that it was the true consensus. I don’t know how woo-woo you want to get about it, but that there’s something cool going on there. The creative people are tapped into it a lot. I had that model. I thought, “I definitely want to get the painting done and someone way more qualified will do these models. I’m going to leave that one alone.” Ten years go by and I started asking people and asking people and finally it dawns on me, a friend of mine said, “Monika, some ideas are yours, why don’t you run with it?” That was when I decided it over two years ago that I was like, “I’m going to sell my arts-related business. I’m going to sell whatever I have to sell in terms of investment to fund this and steer The Titanic towards the Fintech capital of the US, which is New York City and make this happen. This has got to be my idea. There are other people that are doing this and something like it in this space. It’s not exactly the way I’m doing it but similar, which is validating at this point. It’s not a bad thing.
This is where it starts to fall apart for me. I know I have a business model that’s working. I have a business model that’s physically working. I would like to add a blockchain component to it to make it extra special, to make it work in an even better way to add a layer of trust in a trustless area that I have here. I’m looking at that and saying I have something that I want to plug on top of that works. It requires a very different business plan and visualization.
You need a blockchain use case business plan. You’re not just going, “Here’s a thing I’m going to do, and I’m going to pitch it in general.” You’re going like, “No, this is specific.” You almost need like a specific go to market token strategy offering to get people engaged in your community and engaged and invested in some way.
This is what I’ve been doing. For the past four months, I have been talking to business advisors. I’m pulling business plan types. I’m a researcher. I gather information and then I move fast once I realized I’ve got like a framework for what I’m going to do. Now, it’ll be done in like two weeks. That’s how I move. I’m in that stage of gathering advisors, gathering all of this, but none of it fits. As I’ve been modeling through this, I’m like, “This traditional business plan is score stuff. 90% of what’s in there already works in my business. You can see it in the financial model. It’s not conjecture. It’s proof. What I want to add on it is only going to attract more clients. It’s only going to amp up what I’m doing. I look at that and I said, “This doesn’t match.”
It was falling into the blockchain group of people that attracted me was tokenization because I said, “This is what I need because I need to add a business plan on to add capital for a specific section of growth in my business.” I don’t need it at all on this other side, but I don’t want to use my revenue from there because then I will tap out my growth that I’m on. I have a growth trajectory and I can only handle and take in so many clients. If I took capital away from that, I damage my ability to grow at the speed that I’m growing. I can’t do that. I have to take in capital some way to do that.
For your specific problem though, you may not need a business plan and you may not need anything but a good strategic partner. The thing about blockchain, and good business in general, is blockchain is such a clear architecture for it, where you used to see competition, you now see collaboration. It’s not because everyone figured out that Kum Ba Yah is the way or something. When people in a market place are starting to come together, there’s still such an early need for interoperability. Not even to play nicely, but the market is so young that there’s no dominating feature. There are no dominating forces and dominance wouldn’t get you anywhere anyway. You don’t want to be the only, you want to be one of a healthy several.
I lecture about this. I write about this in my column. I’m always telling people. It’s like, “When you’re in blue ocean territory, you should be scared of sharks. It is not a good space to be in. You need to be surrounded by a few other boats.” You want to know land is insight and people who are around you because otherwise, it means that you have a complete reinvention education. It’s so much opportunity for failure. I call it disruptive versus market making. The success rate of truly disruptive companies is so low. It’s in the single digits. The success rate of market making can 3x that, maybe even 5x that depending on the marketplace almost immediately. You go from 5% to 15% or 25%. You look that and you go, “Why wouldn’t I want to make myself more successful?”
You’re going to make yourself more successful and the days of writing a business plan to get there are over. If you can put it into a simple slide pitch deck, that’s great. If you can put it into a PDF, just a few pages, that’s great. Take that and boil it down to even one page is even better.
You’re presenting your plan. How many of them read the full plan?
I don’t present a plan. I have a deck. I have a one-pager. I have a book. I have articles, they know what I’m doing and they’ve seen and haven’t been and if they want to dive into the architecture, I’ve got a bunch of screenshots. I’ve got everything mapped out. I didn’t know how to do a cap table. I had to figure out a cap table. That was one big like, “What’s that? How does that work?”
What’s a cap table?
It’s a capitalization table. It means who owns what piece of the business currently. Do you own 100% of it? Have you incentivized people? How have you done it? What type of stock do they have? Will it dilute as the amount of stock that issue gets larger or is it preferred stock? It’s like all numbers.
This is where it gets complicated because as I’ve been exploring that, I go a traditional cap table doesn’t apply because I don’t want to sell my entire business. I don’t want to sell into my entire business. I only want to tokenize. I own a podcast production and hosting platform and it is only the hosting platform because it has this admixing and future capability that is the area that I want to essentially tokenize and build a blockchain on top of, the other side of it is a service-based business. It’s generating all this revenue and it’s building people who come over to the hosting platform, yes, but it’s not the future growth of the business.
It’s a means to help those people become more successful so they can utilize what I offer on the other side too and better so. It is only over on that what I call Podetize, on the Podetize platform that it matters. I was able to take in investors or investment or a partner as you said and be able to pull that in and pull this blockchain into it because it’s going to make it run so much smoother, so much faster and so much better. Looking at that going, ” I don’t need it for my whole business. I have a financial plan from a whole business, but the cap table doesn’t work unless I’m letting them buy in over here to that existing business.” I’m happy to collateralize it with that, but I’m not letting them buy in because it doesn’t make sense.
That makes a lot of sense. That the days of doing straight token offerings that don’t have equity that backs it up are maybe over. The business plan is saying, “Here’s what I’m doing and here’s what I’m going to do. I’m not sure if those two thought exercises are the most helpful rather “Here’s the ideal thing I would do.” I got back from a conference. I was up at a Powder Mountain at a summit conference for blockchain. It was this beautiful exclusive invite-only thing. I went to a lot of cool talks. There were only about 100 of us and half of us spoke on something at least. It was fantastic. I came away realizing that I own more than I thought. I have more than I thought and I may not need to take in any money. That is fantastic.
That’s a real a-ha because even if someone comes to you and that realization that you don’t need it is empowering in and of itself. That’s where I am too. I don’t necessarily need the capital because I could borrow against it. I could do a whole bunch of more things. I don’t necessarily but it doesn’t mean that I’m not open to the idea of capital. That’s where you look at it. That’s an empowering position because you don’t need it.
That’s the thing, don’t raise money when you need to. Raise money when you don’t need to. It’s a good time to be raising money. If I run out of runway, self-generated runway, that might be the case. When I looked at how long, even conservatively, how long it could take us to become significant revenue positive, like covering all of our bills, paying people butts and seats. Maybe not like gazillionaires yet, but revenue positive. It’s not so long that I don’t have a runway to get there. What am I selling my business for? I would love to have the right partner. This is where I go back to my lesson was I’m not out to pitch my company and raise money. I’m out to make sure the right people are my partners and that might be a capital partner and that might be a marketing partner. They’re all types of different ways that partnership is going to make my business work better.
That’s what I’m doing is I’m trying to figure out under what terms do I open the door and say, “Come in behind the curtain where the business is happening because I want you here because you belong here with me,” or “No, I’ve got this.” It’s almost like dating. All business is like dating in that sense that it’s so personal. You and me, we had to get along before we were going to do this podcast together. The real capital could be in all of the content that we make, but the real capital that we had to establish first was that capital of trust. We had to know that we were a good fit. “Does your work style work with me? Do your hours work with me? Does mine work with you? Do we put each other off? Do we counterbalance each other? Do we like it? Do we want to spend our days even dealing with each other?” If we don’t, all the money in the world is not going to make profit.
Why would you take a capital partner that did that? That be so stressful. I can’t even imagine that.
The idea of taking this document, it’s like, “I made a business plan.” Shopping it around to a bunch of strangers hoping that one of them comes and gets in bed with you, it’s terrifying because you’re not doing the thing that you should be doing which is, “How do I get to my ideal?” First of all, instead of saying, “Here’s my business plan of what it is,” why don’t you write out what you wish it was? All of the things you wish it was and almost visualizing in that sense. If you do that, you can reverse engineer back and go, Now, who are the people that can help me either get the right folks in the door or be those right folks in the door?” From the fact that you’re going to want to tokenize, do you need to tokenize yourself or do you need a platform that the way that you know how to make podcasts and another so many businesses and so many verticals. They don’t need to go out and figure out how to make a podcast? They need to come to you and have you do that stuff while they make content about what they already know.
Is there a blockchain I can plug into and is there somebody who is going to maximize that with me and we can partner up and collaborate? The thought has been crossing my mind that that’s may be better for me.
That’s investment. I’m thinking about resources differently so much now. It’s not about money. It’s about the resource of trust, the resource of time, the resource of enjoyment and the resource of a good fit. Those are true resources.
What’s so interesting is it is in seeking and writing a business plan that has made us both start to think this way. Here we are questioning business plans, but that’s the best part about it is that we look at these models and we go, “This model doesn’t work. This business plan is not working. This is not the way I want to go about doing this.” It’s broken. That gets me questioning and thinking maybe the capital raising process is broken as well and is there a better way? Is there another way? If we’re both coming around to that and many other people, as you said before, there are probably many other people thinking the same way we are.
I want to say though, I learned a lot from writing the business plans from going through the process. You learn a lot about making yourself think about some parts of your business that maybe you didn’t analyze completely before when you have to go to articulate it. I do think for a lot of people there’s a value in that because you didn’t have to articulate something. I do find the value of. I read a plan every year. It’s usually a one-pager though, not like a serious, like full document or everything. There are sections of it I might write out in greater detail. We have a much more concerted marketing plan because it’s extremely important. That might be a three or four-pager to cover all the sections.
If you do that and you go through and you go, “I’m going to look at all the avenues of my business, all the arms. Which one’s most profitable? What needs more of a jumpstart? Where’s the growth? Where’s the investment we need to go, all of that.” You’ve done that. If you go, “Where do I imagine blockchain might fit in or where would somebody who is in the blockchain space, could I ask them about this little part of it?” Circle that and think question mark blockchain or circle this and think question mark external investment or circle this part and go, strategic partnership maybe and like it’s a matter of mapping it out and saying, “Here’s my business in a snapshot,” whether it’s one page or it’s all these. I can now look at the pieces and wonder where external resources of trust, of interest of capital of the partnership, could maybe plugin and then begin to go, “I’m thinking of doing this stuff and partnering up.” What would you ideally like to do and see out of a platform like what I’ve got? Maybe that’s a conversation starter because it’s not a matter of “Here’s my business plan. Do you have to give me money? Here’s my business plan. Do you want to tokenize me?”
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I’ve had an interesting model in my 3D print business when I had that before when we started our first podcast and all of that. As I would go around in, some of these companies would want to talk to me and so they didn’t want to pick our brains and find out what we thought about the industry and what was going on. I can tell you many times they would say, “Where’s your planning can I invest in it? I didn’t have one. I was like, “We decided that the business wasn’t worth doing, that’s why we’re doing the podcast.” Because I had had a plan going in like this was a premise and we wanted to test it out via podcasting whether or not there was a market need for it. What we quickly found there was no market need for what we wanted to do as a service business. They wanted the information more than they wanted the business itself. When you’re somebody who’s going like, “Your information is so valuable. Where’s your product? I want to buy into you.” That’s an interesting world to be in as well, is like having that being that center of influence is important when you’re in that space. It is a lot easier to find the right partners to define the right people so they could become attracted to you.
It’s almost like marketing to not your end-user, but to your ideal partner. It’s like getting the best possible Tinder profile for your business. No more than five pictures, don’t get too lengthy, make sure there are no typos. It’s like the same thing applies to Tinder as does for a summary on your business.
To quote our friend, Adryenn Ashley with Loly that we have to be very clear on what your outcome is, “Do I want to get laid or do I want to get married?” If I clearly then define my profile to fit that, I’m going to attract the right people in.
Do you want to do a convertible note? How do you want to raise it? How long do you want them around for? How quickly do you think you can buy them off? I hate to make a prostitution reference. Do you want to pay by the hour or do you want to have to pay it long-term like a marriage? I’m not sure.
I was speaking at a high-level mastermind. One of the things that I heard because there was a couple of real estate putting investment funds together and buying into properties. It’s been going on this private lending model. You have to go around and they have to seek investment from people. One of them was frustrated because he thought he had a great deal. It was a great deal at the end of the day. He had a great deal, great package together, but he was approaching everyone. They were like, “it’s not the right time for me.” There was this constant denial. You’re starting to feel like, “What’s wrong with me?” He did an interesting thing. He dove deep instead and said, “Maybe, it’s the way I’m asking. Let me instead go and ask for advice. Is this the right plan? Is this the right program?” In that seeking advice, some guy says, “It’s the right plan. Let me write you a check because I’m looking for an investment like that.” That’s how it came to him and his deal went through at the last minute.
Have you heard this before? I’ve heard it so many times. If you want money, ask for advice. If you want advice, ask for money. People that are being asked for money have a whole bunch of opinions, but if you start by asking for their opinion, a lot of times they’re like, “Good idea.” They get right involved.
We come back to that that’s maybe still a good place for a plan because if you have a plan, then you have something to ask people for advice on. At the end of the day, we still need to do it. Whether or not we think it’s broken or it’s the right format for us.
If you break the plan down, you end up with like, “What’s your elevator pitch? Show me a model. Make a drawing, sketch it out and tell me where you think it’ll go.” It’s like, “Tell me the story of your business in less than five minutes or pages. That’s how you craft a conversation. It’s almost like if you show up on a date, where are you from? Where did you go to school? Do you have any kids? Do you want any kids? Basic stuff. Are you sticking around here? Are you moving around? I get a feel for you. Maybe we’ll have a second date.”
This is why I’m not a fan of the equity crowdfunding model because you have to have a lot of leads, you have to have a lot of that because it’s constantly a blind date. It’s speed dating at that if you’re going through that process. To me, you’re going to do way more work to do that than you are going to do to be more focused and finding the right person to try to be in front of. To have your profiles matching and try to do that. While that may take the same amount of time, it’s a whole lot less effort calls to people and interactions.
That’s what’s so exciting about blockchain and some tech now and especially in hoops in the blockchain space is that crowdfunding is now so enabled by hefty technology. That it’s going to be easy. You’re not on the phone with one at a time. You can do one to a million if you get your marketing right in there.
Then it’s all in marketing and lead generation and you better be good at that and you better invest in that. That’s also another thing. The bootstrappers have to make all the phone calls and have to do all the work and have to send out all the tweets and all the messaging and do all of that. The ones that are succeeding are spending money on that. It’s the same thing in Kickstarter because I advise a lot of Kickstarters and I’ve gone through a lot. If they don’t spend about $25,000 to $30,000 on their marketing side of their campaign, they will not succeed. It’s that simple, unless they have a giant list. This is the one a-ha I had at a meetup I was at, is that there may be a place for equity crowdfunding in a totally different way for what I want to do. I’m considering it because I have 150 shows right now on my platform and growing. Wouldn’t it be fun to have it be almost like a podcaster-owned tokenization network? I was thinking of like creating it like you have to be on the platform to be invited in. You’re invited in to invest in your own future platform and you get a say in it.
You’ve got a good idea there. It would take a bit of tweaking in terms of token economics and for you to make it happen. Again, when you start to go into tokenize anything in the US, the one precedent that’s been set that it could work to your benefit is the cashback rewards precedent. You spend a dollar with your credit card, you get 2% back. If you tokenize that, it’s using digital money to do the same thing. It’s specific. They went out as like that credit card went out and made those connections. They were able to give 2% of it back to you, but they get a discount probably five. It’s like you got a revenue model for them and good for them. You’re able to get that and capture that return back. For you to say, “Whatever it is you want them to do, I’d rather you pay me in Bitcoin and if you do, I’ll give you a discount.” You’re allowed to do that. You’re allowed to say, “If you pay me in Mexican pesos, I’ll give you a discount.” You can make a deal like that, no problem.
If you paid cash at places, you get a discount. You’re allowed to do that. If you pay me within ten days, I’ll give you 10% off.
You can do that. If you were to say, “I’m going to make my own token and if you use my token to purchase anything,” or you partner with Sweatcoin and you get people to start earning their way into your platform somehow. You start to reward them with what you’ve got. You’ve now got a reward system. If you back up some rewards, just like Sweatcoin had to, you can’t walk in there to Sweatcoin and there’s nothing to do with it even though they don’t have good rewards. They’ve got something and that’s the beginning of that ecosystem. You’re onto something and it’s being done. It’s been done before. It’s being done around you, but it’s specific to you. With the user-base you have, you could have a great opportunity to jumpstart the marketing in the blockchain space by simply making it easy. That means a good interface for people to engage some sort of thing that represents some value.
If you start by giving, I can give RiseCoin away. I can’t necessarily get you to give me any money for it, but I can give it and if I’m trying to get users, wouldn’t I be spending money on marketing anyway? Why wouldn’t I give away RiseCoin to get people onto my platform? If my coin works only on my platform, with security or utility, it doesn’t matter. I gave it to you. I’m allowed to give you stuff just like your credit card can give you 2% back. I can give you RiseCoins. You might have an interesting model that starts with a gifting economy that jump starts the economy that starts to then generate more revenue.
This is why you have to look at what exists out there. You have to look at business plans and business models. Take a look at all of that, but it’s okay to reject them and say, “I want to do it a little bit different because it’s a different technology. It’s a different application. It’s a different time.” It’s also okay to say, “I only want to talk with people and work with people who are going to see the pitch deck side of it and we’re not going to dive deeper into business plans and I’m not going to forward all of those things until we are three days down the road.” It’s too intimate. It’s too detailed.
In tech, I’ve not heard anybody ask for a business plan. They asked me for a deck. They asked me for a summary.
Start there if that’s what you want to do and then go deeper. I hope we helped you guys out there. Hopefully, in that, we’re moving you forward because this is what we want to invite here on the New Trust Economy is this conversation about, “Is this stuff working in this economy? Is this stuff working?” If it’s not doing what we to do, now’s the time to be innovative about it? It’s time to reach out and find other partners and other people who are conversing about this. There is a great mind share around the lack of trust and how to build better trust in our future.
Guess how much money Microsoft raised?
I have no idea. I think it’s zero.
Zero and Apple is something like $1,200 in the beginning. Then there was around for $250,000 in the first couple of years and right before they did IPO, they were told they should go raise $1 million because it would help with the IPO. Granted those are two very amazing examples, but there’s a lot to be said for making the business great. If you make your own business, if you throw yourself into it, in the end you probably want to own more of it. It might be more worthwhile to get feedback and advice, but you may not end up needing the money if you’ve got a good business to back it up with.
Everyone, thank you so much for being here with us on the show. You can find us at NewTrustEconomy.com and on social media, @NewTrustEconomy. This is Tracy Hazzard and Monika Proffitt signing off for The New Trust Economy.
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