111: Navigating Token Management and the Future of Web3 with guest speaker Bruno Faviero the founder and CEO of Magna

Hello innovators, explorers, and risk-takers! Welcome to another episode of the Web3 with Sam Kamani podcast. I'm your host Sam Kamani, and on today's episode, I'm interviewing Bruno Faviero from Magna. He is the founder and CEO of Magna, and Bruno has been making waves with his unique approach to token distribution and management. Helping protocols navigate the complex world of Web3. We are going to talk about Magna's journey, the ins and outs of token management, and get Bruno Faviero's insight on the current trends and the future of the blockchain industry. Whether you are a blockchain enthusiast, a professional in this field, or just curious about the world of Web3, then this episode is packed with valuable insights. Finally, nothing mentioned in this podcast should be taken as investment investment advice. Do your own research. And also, I do not run any ads on this podcast. My only ask is that you share this episode with a friend. With that out of the way, let's get into it. Bruno, it's great to have you on the show. So looking forward to talking with you. Just earlier we were talking about that you're at Token2049 and how I met your team member Wesley in, in Dubai recently at some other conferences. Seems like you guys are everywhere. But yeah, would love to learn a bit more about Magna and how did you get started or how did you end up building, building your company?

Yeah, no, it's great to be here as well. Thank you for having me. Magna, we call ourselves a token management company and the core use case really that most protocols come to us to help them with is what we call token vesting, token unlocks, token distribution. And that's usually a protocol that has stakeholders, be them investors, employees, community members, sometimes retail investors and open offering to the community. And really what we help them with is anything that involves distributing tokens to those stakeholders in a way that's transparent for everyone involved. So stakeholders can see what they're going to get. Admins can see what the timeline is, what the schedules look like. And then we focus a lot on really streamlining the process for the projects. So we can support them if they want to lock up all the tokens in an escrow contract, set it and forget it. They can do that with Magna, put it all on chain, and then make it easy for the stakeholder to come in, get invited to the platform, upload their wallet, verify that they own the wallet. We support that workflow. That's our core workflow. Some protocols want us to use just for recurring airdrops. So if they want to not lock up everything on-chain, but they want to go into the app once a month and hit distribute, we support that workflow too. One of the, I think the most valuable parts of our workflow is also incorporating tax withholding into the distribution workflow. That's something that we rolled out recently for some US customers. And then a unique offering we have is also if you want to partially lock up your tokens. So you want, you like the idea of an on-chain lockup of having your users have to claim tokens and having a claim portal, but maybe you don't want 100% of your tokens on the platform. Let's say you're on a 4-year schedule. We can make it possible so that you can only go in and if you want to upload, say, 3 months worth of tokens for all of your stakeholders at a time. You can come in once a quarter, upload, deposit 3 months worth of tokens, and then people can withdraw and you top up as needed. So yeah, like really all of these targeted toward protocols. Usually it's founders, sometimes it's the finance operations, HR teams. Most, the biggest pain point is if they're about to launch a token, but we have protocols that come to us years after launching a token and say, hey, we're still doing it manually. We're still in spreadsheets. We want to switch to Magna. And we have a fair share of customers that are years away from launching their token far when the token launch is far in the future. And we help them get all their data in one place. Give it to all the stakeholders to see and just make it easy so that when they get to that token launch, they can just hit distribute and they're off to the races. Yeah, our goal is to help these projects not have to worry about getting the details, remembering sending tokens, having to track it all in error-prone spreadsheets.

Oh, that's fantastic. So I have a first, my first question is, do you have any examples of the types of protocols or companies or any brands that, that use Magna?

Yeah, we have a number of protocols that we work with actually on several different chains. So we have protocols in Solana, that's where we started. One of the biggest protocols in Solana is Access Protocol. They're one of our clients. They've been using us for almost a year. They were one of our first big customers on Solana. We also expanded to Ethereum. We're on mainnet Ethereum, of course. Now we're working with the likes of Dust Labs. They're distributing their Dust token through Magna. We also just supported the launch of Amino Rewards. They're an Ethereum protocol that just launched, I believe on Friday, sitting at, I think a $15 million market cap. So they're doing all right. And we had them go live for all of their stakeholders on Magna. And I think we had about 500 people claim their Amino tokens within Magna in the span of the first 3 hours of launch and went fairly smoothly. Our team was standing by to have any issues, help them with any issues. We've also worked with teams on Arbitrum, teams on Polygon, and looking at even some newer L1s right now, Aptos, and looking at that ecosystem to support them. So our goal is to really help teams wherever they are, whatever chain that they're on.

When looking at this space, not necessarily just related to your customers, but what some of the, what are some of the mistakes you have seen teams make when it comes to token management? So they could be protocols or some other projects in the space. Yep.

Yeah, the mistakes really fall into a few different buckets. I think one is just that operational bucket, like how are they doing it today? And I think a lot of teams that are doing it in spreadsheets leaves a lot of room for error around doing the math correctly. Are they tracking the right amounts on the right intervals at the right times? It gets especially tricky for some teams now where we're seeing because a lot of tokens got pushed back in 2023, a lot of teams have both a vesting schedule and an unlock schedule. And that, that's actually fairly tricky to track because you need to track both and only when a token is fully vested and unlocks can you actually send it to the recipient. So that's one example where even doing it yourself in a spreadsheet can be very error-prone. And I think it's a lot of these little things that add up to the entire workflow. That could cause issues. We just rolled out the ability to make sure that someone verifies their wallet so they can, you can know that if they put their wallet into Magna, that it's a wallet that they have control over, that they can access, that they've signed a message. So there's that element of just, is there any room for error in the math, in the sharing, in the tracking? The other is also just transparency. Can everyone see exactly what they're going to get? And some people say, oh, is it all on-chain? I think if you make your own vesting contract, then maybe, but oftentimes there might be a lot of time before the token goes live or the vesting contract goes live where you still want to see what you're going to get when the token launches. If you're an investor, as those tokenomics are changing, you should be able to see what your allocation is. And then we get a lot of teams that come to us and the first one is the operational mistakes. Second is just how do you ensure there's transparency for everyone involved? The third is literal smart contract challenges, right? And you've seen teams come to us, they code, maybe they code their own smart contract for vesting. First off, you're probably going to get that audited, right? And that's going to cost you tens of thousands of dollars, at least $20,000 to $30,000 for a reputable auditing firm, several months on the backlog, potentially. And then you don't necessarily know that smart contract is going to scale with you as you need more features in the future, as we need to add delegation, voting, as we need to change the types of schedules you have. We see teams that they build a schedule and then they say, oh, we actually migrated our tokenomics. Now we need a new contract. And of course, one of the worst mistakes we've seen customers make, yeah, one of our first customers had it. They wrote their own smart contract. I don't know if they got it audited. And then we actually got a message from one of their investors saying that there was a bug in the contract and they had accidentally locked permanently 10% of their token supply in this contract because of an arithmetic issue. And so that's the worst case truly is like you do it yourself, you mess it up and now the tokens are gone. And so we put a lot of money into audits, into development efforts, into making sure that these transfers are gas efficient to make sure that on all those fronts, right, like the numbers are accurate. We do our best to make sure that there's an audit log and you can see everything that's going on, but also to make sure that smart contracts do what they say they're going to do. And you're able to see where the tokens are going, make sure they're going to the right place. And depending on the settings you have on, sometimes cancel the vesting if it's an employee that's terminated, or maybe you're working with in a low-trust environment, you actually want those to be uncancellable, immutable. We support all those different options.

Yeah. Does Magna also help with like smart contracts and those type of technical challenges as well?

Yeah, so on our end, we actually write all the smart contracts that our customers use through our platform. So when they use our interface, they're deploying our smart contracts. Through our factory contract. Now, we don't have any admin authority, we don't have any upgrade authority. So at the end of the day, our customers fully control the smart contracts that are deployed, but the smart contracts that are deployed are smart contracts that we wrote. Now, we'll often take customer feedback and add functionality and features, improve our smart contracts. We actually have some customers now that are pushing the bounds of our platform. They're wanting to distribute to high tens of thousands, low hundreds of thousands of recipients, and we're We're reworking our architecture to make it as efficient as possible, but we eat the cost of a lot of that development because we want it to just be a solution to the customer that evolves not only as they evolve, but as the market evolves. And so we want to make sure that if in a year or two years standards change, best practices change, there's more integrations that they need, we want to make sure that our tool stays, keeps up with that evolution and that they're able to keep using it and benefiting from those developments without themselves having to go pay developers, pay an auditor, etc., every single time.

Oh, fantastic. And you must talk to a lot of other protocols and projects and products in this space. What are some of the trends that you have seen recently?

Yeah, it's interesting. I think the biggest trend we're seeing recently now is a lot of protocols that had postponed their token launch in late 2022 or early 2023. They're now putting it back on the calendar. They're saying, hey, we're launching our tokenomics soon. Our token's coming out.

Early 2024.

Q1, Q2. Yeah. If not at the end of this year. Exactly. Everyone is launching a token Q1 of 2024. So in some ways it's a little bit funny because I remember when we wrote our investor update, We, we said, oh, now it's a bear market. A lot of these teams are going back to the drawing boards, have really thoughtful tokenomics. I think that's true for a lot of projects, but I think you're definitely now seeing teams feeling the pressure to get a token out there from the community, from their investors, even from their own team. And so I think Q1 2024 is gonna be that explosion of tokens again, if you're seeing what I'm seeing, which is teams are certainly saying that. But so that's one big trend. I think alongside that explosion, we're seeing renewed interest in gaming tokens as one big sector for us. We just brought on a team member in Asia and he's going to the YGG Games Summit next week. He's going to Hyperlake Blockchain Week. He was in Dubai. And so I think we're seeing a really consistent, but particularly renewed interest in excitement in gaming tokens. Especially outside the US, I think, where teams can have a little more flexibility with their token mechanics and their exact, even what they do with the tokens. And then I think the other thing we're seeing is a lot of activity on Layer 2s, I would say, and Solana as well. We ourselves have seen that on Ethereum, among other things, are huge gas costs. If you want to onboard thousands of users, tens of thousands of users, even deploy a vesting contract, that's you're talking at least hundreds of dollars, if not for all these, there's thousands of dollars. And so seeing a lot of renewed interest in teams that are exploring L2s or some of them are looking at Solana if they're really keen on high throughput, they're looking at Polygon, they're looking at Arbitrum. And so I think we're seeing a lot of interest in teams and looking at those types of networks in choosing what is the right network for them.

That, that is very interesting. I have a question. It is the same observation that I have made, leaving GameFi alone because GameFi has its own tokenomics and economics and value generated from players gaming and new people coming in the ecosystem. I'm just talking about all the other sort of DeFi projects and all the other projects in Web3. I don't know where the liquidity is going to come in early 2024. I know there is this massive interest because there are two things that people are counting on. One is the Bitcoin halving, and then the other one is the Bitcoin ETFs being approved, that with all that liquidity is then just going to go to Bitcoin. I don't see where the liquidity is going to come for all these 10,000 other projects who are going to launch their token in early 2024. It's just the liquidity in the last run came from all sorts of money printing that went all around the world. Trillions of dollars was printed, not only US, every single country on the planet followed that pattern and printed more money in 2021. And that's where the liquidity came from. That's how I see it. And that's what went into all these other alternative assets and liquidity dictates where the market goes and how projects get funded and so on. Same in the venture capital ecosystem. You have a lot of experience in that as well. Am I missing something?

I think the thing you're missing is just how much of that liquidity oftentimes comes from just individuals having more money, whales having more money. I think what I've personally seen is sometimes these individual crypto investors, these retail investors, these whales in the ecosystem, they will often invest in projects, use projects, participate in DAOs. You see a lot of those become LPs, limited partners in venture funds. And they're increasing their commitments. But even just the average user, I think there wasn't a lot of individual liquidity. Who is buying and selling $50,000 NFTs when Solana's at $8 or Ethereum is at $1,800, right? Thinking back to January, last December. And so I think as you see those values rise, the Bitcoin price, but what's the trend in the market, right? It's always Bitcoin goes up. And then you see the large cap alts go up, Ethereum, Solana, some of the others. And then you see that always trickle down to the altcoins and then eventually the meme coins. And I think that in some ways is a bit cyclical, right? Because it's the people that they had, they're sitting on Bitcoin, they're sitting on Ethereum, they need something to do with those tokens. They're the ones that are going trading NFTs or using your new orbs protocol. They're, buying those NFTs and then putting them on the NFT Finance, the NFTfi platform. And so I think that's one thing I have seen among challengers in the crypto space. I think they've become much more honest with themselves that liquidity is going to come from within the crypto ecosystem. And that a lot of them in my mind have thought, look, we're better served making a platform that's really going to be exciting and resonate with people that are already crypto native or have crypto assets. We're not going to depend on people coming in net new from outside the crypto ecosystem. And so I think a lot of the new go-to-markets are very much focused internally and saying, you know what, maybe this market isn't going to explode, but at the very least, I think as the value goes up and liquidity goes up, how can we take advantage of that excitement, that energy, that momentum from within the market? Now, there's some parts of the crypto ecosystem I think that are looking at how can we take advantage of institutional inflows? I think the real-world asset space is a huge one. We have some thoughts on, on how Magna might play a role there in the future, but we're still fleshing those out. I think seeing lots of founders going into the stablecoin ecosystem and also thinking, okay, institutionals are going to want an alternative to USDC or USDT. No one's using PayPal USD and maybe they don't feel comfortable holding DAI. So seeing some innovation there in stablecoins, seeing lots of innovation in a lot of different ways. Massive innovation in stablecoins.

Yeah.

Yeah.

Inflation boosts all sorts of stablecoins.

Circle is now the incumbent, right? It's a huge enterprise incumbent and people are looking at it and saying, where's the opportunity to build better stablecoins for crypto natives, better stablecoins for those incoming institutionals. And so I think, and even some other projects like a good friend of mine, Gautier, he started AMarket alongside Binance. They're trying to build a crypto ETF to track the top 20 coins. I think, sure, I'm sure some outside crypto people are going to invest in that, but I imagine that's something that almost anyone within crypto is going to look at and think, you know what, I love crypto. I'm a little tired of always rebalancing my portfolio and manually managing these strategies. So I think it's products like that, that I think we've had now 4 or 5 years, 6 years since DeFi summer. I think we're starting to see an understanding of what crypto traders of all levels of sophistication want and see products really targeting each of those different tranches.

Yeah. I mean, that's what surprises me that in the last 6 years, the whole blockchain ecosystem has grown so much. Back in, I remember 2016, '17, the ICO boom, there was no term like Web3. It didn't exist. There was just like Bitcoin and then there is all the other cryptos. That was it. And then now we have things like GameFi and DeFi and RWAs and so much stuff out there, like dev tools and infrastructure and then different sectors inside of Web3, even in Web3, you can specialize and go really deep. So it's very interesting. I do think that the whole field is going to grow and I am very optimistic for 2024 that, as you said, people are understanding.

Yeah. And I think that's what excites me is how much diversity there is. I think because we at Magna. We work with all the different verticals. We have GameFi customers, infrastructure customers, DeFi customers. We have customers around the world and all the different chains maybe you've never heard of, but are just coming up and trying to make a name for themselves. And I think that that's the beauty of crypto is there's a lot of different parts of the ecosystem that have their own energy and momentum. And I think the rising tide lifts all boats and I think the rising tide is the Bitcoin ETF approval, it's the halving, it's going to be that waterfall increase in the value of these assets.

Yep. Yep. And we still don't know, like liquidity events, like no one expected or, or anticipated COVID-19 will come and it will create massive liquidity bubble and a low interest environment to rival all low interest environments ever existed in the world. I do.

Yeah. And some people think we might be at close to peak interest rates and that those are going to start coming down, not to zero, to 4% in the next year, 2 years, 3% in the next 3, 4 years. I'm not a macroeconomic specialist, but at the very least we'll be in a rate decrease environment, which I think is also good for alternative assets.

Just on a side note, I was talking with LP yesterday and based in Europe, and he was saying that in 2021, I was asking him, how did he get into crypto? Cause it's not usual because most of his family members still think that crypto is a big scam. And anytime they read a headline, they read about SBF and they asked him what's happening. Are you going to go to jail? So it's just, that's the level of everyday people. But yeah, I was asking him that, okay, how did he get into crypto and stuff? And then he said that in 2021, if he was keeping his money in bank, he would have to pay interest to bank, not only lose to inflation when there was massive inflation in 2021, there was a massive environment.

So.

He would have like double negative. You'd have to pay 1% interest for keeping money in bank. At the same time, DeFi was paying really good yields. So that made him look into it. And then the rest is history and he did really well after that for himself. So I, and right now there is a bit of a slowdown because of the banks paying 5% interest rates in some parts of the world, 5 to 6, 7%, even some places, but then that's has never lasted and it always comes back. And that's when we would get a lot more liquidity coming back into the crypto and alternative sort of finance ecosystem. It all points towards being more hopeful for all of us in the industry. Talking about funding and all that, you also work with early stage founders and you have a fund, LOF Fund, right? Would love to learn a bit more about it.

Yeah. So I have a small operator fund. We actually raised it before I started Magna, about 6 months before we started working on Magna, 9 months before we started working on Magna. And I run that with 2 other founders and I do some angel investing of my own as well through that. Occasionally invest in early stage founders, pre-seed and seed stage, but also I give a lot of fundraising advice on Twitter. It used to be much more active. I think while we were fundraising, I was live tweeting the fundraise and A lot of people found that really informative. So I kept, I kept tweeting about the fundraising tips and tricks. And for a long time to this day, I still probably get 2 to 3 founders a week that come to me for fundraising advice. And I just get a lot of energy out of working with early-stage founders. I think they're just incredibly bright people, energetic, and almost always deep experts on whatever issue they're tackling and really I've learned so much by just meeting founders and building relationships with founders.

Yep. Oh, that's, that's fantastic. Coming, coming back to Magna, what are some of your biggest challenges with building Magna?

One of the challenges that we've had is certainly navigating the macro environment. We signed our term sheet in the peak of 2022 and closed it at the bottom of the market in the fall. And then. We did a big push into gaming tokens and then those kind of disappeared for a little while. So it's been a bit of a wavy road these past 2 years, but I think it's for us, what's been incredible through that is just seeing that all the builders that we work with, they're still there. They haven't gone away. I have not seen a lot of crypto founders that we've been working with or talking to leave crypto. So that's been really encouraging is I think like we're all in this because we love it. We're committed to it. We're dedicated to it. I used to do AI for 6 years before I came into crypto. Everyone asks me every week, Bruno, why aren't you just spending your time doing AI? And I said, look, I'm in crypto for a reason, right? Because I really love the technology. I love the community. And I think it has the potential to have an impact on our global financial infrastructure, which I think is huge.

Yes.

And still does. The first crypto angel check I wrote was in 2017. It was a company doing DeFi infrastructure. And I said, yeah, like this to me looks like the future of Wall Street. And I still believe that. So I think it's been navigating the macro environment. I think the other has been also navigating the fact that not a lot is standardized in crypto, right? If you're in Web2, you can look at the way that the market has been doing things for 10 years and say, okay, I'm going to build a tool for that. In crypto, everything is changing. The standards are changing. What networks people are building on are changing. I think best practices that don't even really exist. We, me and I teamed up with a couple others recently in New York from Vouch and one or two other companies to start a crypto operations community where we bring together heads of operations, CFOs, risk compliance, HR. And it's interesting how much the lines are so blurred in those roles. And people are always looking to others to say, how are you doing token compensation? How are you structuring your illegal grants, where, what country are you incorporating your foundation in? Because the best practices a year ago might be worst practices today as these things evolve, as the regulatory environment evolves. And so you are in high danger, I think, if you're working with outdated information. And I think building that into the product sometimes is definitely a challenge because we support a lot of different workflows, different ways to structure these stakeholder arrangements. And then I think the other, the other challenge is just, I think for us initially building our network, I think we came into crypto as kind of outsiders. We didn't know very many people in crypto, but I think that we were very surprised at just how welcoming the crypto community was between going to amazing events like ETHDenver, UCC, Token2049. I don't think in any other field you could meet as many people in as short a period of time. And truly build relationships because everyone is always interested in working together, partnering, collaborating, because we're all trying to push the space forward, right? I mean, I have competitors that I talk to on a regular basis where we talk about, hey, like, is there some way we can collaborate? Like, how are we doing X, Y, or Z? Because I think that going back to the market question, right? I think if we're still fighting over the same set of companies that exist today, I think none of us are going to be huge, right? I think we're all betting on look, we are here to grow the space. We want there to be 100 times more crypto companies. And then each of us can be, everyone in the space can make it and, and be huge. But that's because we're all fighting to, to make it mainstream, make it easy to use and make it a technology that's utilized in all sorts of different verticals from finance to gaming, in our case, HR operations, the future of equity. And so that, that's what they expect to be, right? It's, there's almost no challenge in crypto. That the strength of the community hasn't helped us overcome.

Oh, that's fantastic. It's, it's something that I always think about that why is crypto Web3 always so open to working with people from all around the world and working with and building partnerships and working together to grow the whole pie? It's like in, in other industries, I often see that people are only looking at increasing the quarter of their pie, the size of their pie, but not the whole, the whole thing. Whereas in crypto and Web3, people are more involved in growing the whole, the whole market segment, which is what I find always really positive to hear.

Yeah. Yeah. It's the classic fixed growth, fixed mindset versus growth mindset.

Yes, that's exactly, you said it.

You have to have, you have to have the growth mindset that we're going to grow the pie as cheesy as it sounds.

Yes, absolutely. 100%. I have a couple more questions, but before I forget, I wanted to ask you that, do you have an ask? Is there anything that you are looking for Magna? Are you looking to hire, to raise next round, anything? Feel free to share with the audience.

Yeah, I think the two big asks are always if we can help you, if you are launching a token in the future, you're launching a token soon, or if you, you've already launched a token and you think that we could help you with your community, employee, or investor lockups, vesting, token grants, airdrops, please reach out. We're here to help. And our product supports a number of different use cases today for customers around the world on all kinds of different chains. And we are also looking for senior engineering leadership. So we're looking for a tech lead for our team and also a head of engineering. So if you're a senior engineering leader out there listening to this, please reach out. Other than that, I think that the thing I always tell founders listening as well is if you're a pre-seed or seed founder and you need any fundraising advice or any tips, tricks on how to navigate that process, that's also another area where I'm always happy to be helpful because I'll never forget, right? When I was fundraising for the first time, it was always the people that had done it before that really walked me through not only like the best practices, but also the best practices today. 'Cause the advice I was giving a year ago is very different than the advice I'm giving now. It's almost like a 180 difference. If you're out there and then going through that, I'm always happy to be helpful in Telegram or in Twitter DMs.

Oh, fantastic. What I'll do is I'll leave links to Magna and to your LinkedIn and to all the relevant links in the description on every platform this goes. But talking about that advice that you have learned so much, especially in the last 2 years. So going back. Like knowing that everything that you know now, how would you do things differently if you were starting Magna now? Or what would you do differently?

Oh, it's funny because I get, I feel like people always get asked that and then they give very, I don't know, standard answers. I'll give some real answers. I think honestly, I feel like I would have raised less money. I feel like it's very, it's easy to say now that we've raised a lot of money. We've raised $15 million and we still have almost 12 of it in the bank with 2 and a half years of runway. But I think on two fronts, I think we, for a little bit there in the beginning of those first 6 months, we didn't, I don't think we had that same sense of just constraint of having to get extremely scrappy and creative. I think we got a little like, oh, hey guys, here's a big round. Now let's hire a bunch of people. Let's get a nice office. So I think it took a little while to correct that. To be honest. And I think now we've corrected it. Now we're very much in that scrappy, high-velocity mindset, but it does take a little bit of an adjustment. And I think the other one is I certainly, I do think that there were parts of our fundraise as well where we optimized for valuation instead of really looking for the most value-add partner. I think most VCs, there's a lot of VCs, probably don't add that much value, but there are a lot that really do. And because I invest in a lot of companies, I see a lot of those investor updates. And so I see some VCs had tremendous value. And so I think we, we were a tighter group of investors that was much more hands-on, I would say, or hands-on when appropriate. And then I think we, we also, I think just grew a little bit too quickly in size. I think we're, we've adjusted to it, but again, it's, I think sometimes it's like you gotta just stay as lean as possible for as long as possible. I think all else equal, we learned a lot. We're in a really great place now with a product that's evolving, satisfied customers. We're bringing on more customers every quarter than we did the quarter before. But I think for all, I think all that we've learned, I think at the end of the day, I think the one thing we've done is you always got to start with what's the customer, what's their pain point, and how do you just focus all of your energy on that? Because our big belief internally is a lot of the lessons on how to grow, how to be successful are going to come from listening to your customers. Working really closely with them and making sure that everything you do goes toward making them happy, solving their problems, and getting them to partner with you to both let them— let you solve more of their problems over time. But also, I think one of the best sales channels is word of mouth, right? You have a happy customer and part of that happiness comes from the product. Part of it comes from the customer service. I think the values of the company, the culture of the company, I think that all flows through to the impression that you put on your customers. I think that's one thing we've always put a lot of emphasis on is the customer experience.

That's fantastic. And I have got another question. And that is that, what is something that you have changed your mind about when it comes to Web3 or blockchain and crypto and all that?

Yeah, it's interesting. I think, what is one thing that I've changed my mind about? I think that everything needs a token, right? I think, I don't think everything needs a token, right? I think once upon a time, there was the thought that everything would benefit from being decentralized. Every social network should be centralized. Every newspaper should pay you as you read it. And I, there was definitely a period where I caught up in seeing blockchain everywhere. And now more often than not, when I talk to a protocol, I usually, you know, and they're asking, should we launch token? I usually err on the side of probably not, but you have to ask. The answer is probably not. Yeah. Unless you have a really clear really clear why token. Yeah. We always say people always ask when token and not why token. It's if there's a clear way that it fits in to your, your product, whether it's as a payment, as in the ecosystem, right? Tokens really exist to codify incentives into the mechanics of a platform, right? And if those incentives either are too diffuse that they're worthless, right? They're not worth very much. And so the token's not going to be worth very much, or they're too complex, that can fall apart. Or also if the people just don't care, right? If the incentives are misaligned fundamentally, I think social networks are one example of that, right? I think a lot of people, I think Farcaster is doing an amazing job, but it's not like there's a token on every transaction, right? I think a lot of people, for example, it's not even in Web3. I think the same thing happens in Web2. I've met a lot of companies that have tried to say, oh, we're going to compensate people for their data. You go to look at Facebook, the average revenue per user for a lot of users is like $2 to $3, right? It's not like— who would be a user of a protocol that paid you $2 per year? Probably not most people. I think that's one, right? It's if you're going to launch a token, it should be with a really good reason. It should be thoughtful. It should be sustainable. And I think it should be something that the projects take really seriously. Because I think what does give the space a bad name is when a protocol launches a token and they really don't have a lot of plans to support it in the future and the team kind of forgets about it and then they move on. I think that's in, in some ways what leaves a bad taste in, you know, users' mouths and investors' mouths. But I think in this way we are seeing the average team be much more thoughtful, but also more importantly, much more intentional. Yeah. With their blockchain usage and token usage.

Yeah. You're speaking to the, yeah, you're preaching to the choir because I believe that in many cases, not in all, but in quite a few cases, adding a token can ruin the product. In fact, instead of helping it, because it brings in the wrong type of crowd in and that ruins the experience, whether it is a game or a social media, because then now you have people there for the token and not genuinely to use the product. So it ruins the experience for everyone else.

Yeah. Well, and I don't think a lot of teams are ready for that level of distraction. Yes. Getting pinged every day on Twitter about the token price going down. Now you're managing a market maker and now you have to worry about the liquidity pool. It's a lot to manage. And I think that is what we saw in GameFi is teams said, you know what, we're going to postpone that distraction. We're just going to focus on building a really good game. And once we make a really good game and people love the game, then we'll layer on the token. And I think we're seeing that across other protocols as well.

Yeah.

I'll never forget there was one VC I was talking to and I asked him, it's like, how do you evaluate gaming protocols? And he's like, I play the game. If the game is good, I don't need to see a token price run up. Like it all comes from, is the product Good, worth using, worth paying for, worth my time. And if she can meet that barrier, then, then you have all the optionality in the world about what to do with those users and with that interest.

Oh, 100%. That, that was excellent. That is an excellent, that's an excellent advice. I have a question about like the whole, the VC ecosystem and funding and what are your thoughts about 2024? Where do you see the whole market going?

Yeah, if you believe the VCs, they'll say that they're opening up the checkbooks a bit more. I think you're seeing people— flashback 12 months ago, 11 months ago, no deals were getting done, right? And then you saw Q1, Q2 of this year, very few deals were getting done. And usually it was teams that were going out that were either among the most compelling and they raised great rounds. Or the teams that were most under pressure to raise, those rounds were not always so great. And so you saw a lot of both extremes, right? And you saw people saying, oh, this team's raising an amazing valuation. This team's bringing out a— why are we getting offered a horrible valuation? I think it was all about who has the leverage, right? If a project can command multiple term sheets, they do extremely well. But if they only got one term sheet, the VC has all of the leverage. And so I think going into 2024, I think you'll see more teams going back out to the market. And so I think investors are going to react and they're going to want to open up their checkbooks a bit more, do more deals. You're going to see more diversity in the, you know, sizes of rounds and the valuations. I think they'll still be somewhat suppressed because I think we're still in the bear market, right? And so founders, projects, protocols, don't have a lot of leverage yet. And so I think that the biggest advice I give to founders is, look, I think there's going to be more VCs investing in Q1 at the start of next year, but you should really temper your valuation expectations. You should temper your round size expectations and know that the era of 2022 pitch a big outlandish story, that doesn't work anymore. People want to see traction. They want to see really clear differentiation, monetization strategy, roadmap, and proof points that you can actually achieve it. And so I think, yeah, like the bar is higher for probably on average lower valuations and smaller rounds, but I do think that more rounds are going to get done than were being done in the last 6 months.

Oh, 100%. I can't agree more. And Yeah. Yeah. I found your, I found this discussion extremely useful and I found your insights really valuable. And I agree pretty much with everything that you said. Yeah. With that, I would—

That means I'm not being provocative enough if you're agreeing too much. I need to be less agreeable.

That's, that's fine. That's great, actually. There's no point in being provocative just for the sake of being provocative. And, and I feel like your insights are in the right direction. I do see the market moving as pretty much as you said, and because you are so close to all the numbers and the data, I can trust that. As well as for me, I talk with so many founders and investors and VCs in this space. I can, I can see that this is pretty much the consensus at a higher level. I don't know what the consensus is on the ground among people who use, but This is the consensus among the founders and the investors. So yeah, with that, I want to wish you best of luck for continuing to build Magna. And thank you so much for supporting early stage founders because like seed and pre-seed stage, because that's what's going to create the next wave of innovation over the next 2, 3 years. So that's amazing. Thank you for that.

I agree. I think the founders of today are going to be bringing the crypto users, the crypto employees, and the crypto investors of tomorrow. So we love working with early-stage founders.

Oh, that's fantastic. Thank you. Thank you so much. Just a second. Thank you so much for tuning in and listening or watching this episode of the Web3 with Sam Kamani podcast. By now, you know the drill. Leave a comment or share this episode with a friend and leave a review. I would love to hear from you, so that's why my DMs are open. Reach out to me, especially if you are a founder building a product in Web3. Then I would love to hear from you. What are your challenges? Is there anything that I can help you or my community can help you with? Thank you once again and wish you best of luck in building your startup or your project.