 My first question to all of you is what do you think these curves represent? You can shout it out if you'd like to Population growth are here Adoption pretty good Anyone else? Yes, adoption is so yes, too, but They're also the way cancer grows for example and the way healthy gut bacteria grows and What's not in that curve is the end of the curve which means on the cancer? it actually will extract extract extract until it kills its hosts and On the other hand the gut bacteria optimizes for synergy it makes to host live longer and healthier But it's also the growth incentives that we deploy currently when we invest in companies And the natural growth curve of the services That they represent and will have and there's a natural tension where At the root of the growth incentives that we have in our companies is that individual investors will have uncapped returns This means their share price can have any arbitrary value of course in a practical sense Maybe not but theoretically so what will happen is that those organizations and the shareholders will tendentiously maximize to Have an incentive to maximize the value of that share Which means ultimately at some point it will hit against the natural growth curve of that service Meaning it will start extracting more and more and ultimately we have all the crashes that we have all the time in our economy So for me was the question or my research How can make companies or how can have companies have the right incentives to grow a bit more like gut bacteria and Have the capacity to regenerate and co-evolve with their ecosystem While at the same time richly rewarding those people who put in the risk money and time to make these companies grow and At the at the root of this is how the question how much is enough? So how how can we introduce a cap in the individual investors returns so that those organizations gain the economic freedom To internalize their externalities better because right now the problem is every dollar that we spend on for example improving supply chain sustainability Paying workers better or more fairly distributing the profits that a company makes is ultimately going to hurt the bottom line of investors So a bit of context of why I'm doing this I'm Oliver. I'm the co-creator of memex, which is a personal and collaborative tool for online research for basically collaborative bookmarking annotating and discussing websites papers and videos and for me it was clear from the get-go that Selling shares that give uncapped returns to investors is not the right model for us And that is because the profit maximization incentives that it would create would lead us to do things that are For example creating lock-ins so that means that we can continuously grow at a certain point And this is what happened for example to tools like Twitter Twitter in the beginning was a very open infrastructure They had an API where you could build even alternative clients But then at some point in order to continuously grow they needed to lock down their APIs make it impossible to build those clients and adopt business models that are that are based on growth basically ads so Idealism aside the problem is also that a company like us probably need something between one and thirty fifty million dollars in The first few years in order to get to the size that we want to be at But the problem here is that pre-revenue this type of money only really can come from venture type investments but Vcs and angels won't invest if there is a cap because it inherently breaks the math right like right now and we see invests in Ten companies one will fly really hard and pay out the entire fund. So if there's a cap, it doesn't work anymore So in this talk, I'm gonna walk you through the things we tried to Basically make it work. Like how can we make the math work so that organizations can raise something between one and fifty million dollars? Keep the cap but make the math interesting for investors again and a few design constraints to talk through One is the company needs to have the economic freedom to regenerate Second one is it needs to provide returns that are competitive to uncap returns. So essentially making the math work out The third one is to make it suitable to raise between one and fifty million and it should be working for high-growth companies So the first thing we tried was a revenue share agreement and the revenue share agreement is essentially saying you invest 100,000 we might give you a 10x return and we're gonna share a portion of our profits to Basically pay back this the debt that we have that has a crude the big problem of this model is however that it will Funnel out a lot of growth capital in the first ten years of that business operation and even beyond that this company needs to ultimately grow The second problem is that funding is extremely expensive for the organization at a 10x multiplier Which is already pretty high and but it's necessary to even make it mildly competitive to a VC type investment Accompany needs for one million dollar investment make 200 million dollars revenue. So obviously this is not feasible and Lastly, there's also the need for making a decision now about the future returns of the company of investors and team members Which makes it incompatible with the sense-making? like sense-making approach of investing in equity and Knowing that well don't need to make a decision now. It's actually gonna be Related to the performance of that company in the future and we basically offload the responsibility to making that decision to the market And this doesn't work with revenue share agreements So this brings us to another approach which is redeemable equity and tokens and essentially it works at the following way we can use equity now and we in the 10-year mark or 15-year mark It's it's really flexible in the end We can set a valuation of the company and that valuation can be either Really through sheer market price at that point in time or it can be a self valuation And that's what we want to opt in for is essentially figuring out What is the entire value that our company produces in the world and that could be a function of for example? multiple of our revenue and profits or multi plus a multiplier based on how sustainable we are on an ecological basis or social basis and Yeah, do a kind of a self valuation At that point in time the company would then regain or gain the right to redeem its own equity At that price and this is how essentially the cap would be introduced and making it more performance-based than the revenue share agreements Yeah, so to summarize here for that model It has the economic freedom to regenerate because it caps returns It gives the organization the growth capital it needs because it doesn't need to pay this money back in the first 10 years However, the same problem about the cost of this model are there It will still cost just 200 million dollars in In revenue in order to provide a million dollar in funding and there's not even the team paid for that And the second thing is that 10 years is still a long time You still have the same risk Then you have when you invest in a VC type like with with see money and it's also one of the reasons why VCs expect these higher returns because they're locked in for these seven to 15 years until the exit of the company happens And so for us the question was how can we provide a liquidity and early profitability in the first 10 years as a new trade-off? for investors to invest in these type of companies and To solve this We use a model called the rolling safe and you might be familiar with a tool called firmint Which is a software that allows you to fundraise from your community With safe agreements the rolling safe agreements, but also with equity We're particularly using the rolling safe So what the rolling safe is doing is essentially creating a micro IPO inside the future equity of your company and This these in this case for example We give out 20% of our future equity to all existing and future shareholders or stakeholders It's really important. What's gonna happen here is that if someone wants to invest after say the next round and There is people who want to sell Their shares they're first gonna buy out the existing shareholders who want to sell their shares and only Anything that goes beyond will be invested in the company and what it will do then is essentially diluting The existing investor shares while at the same time increase the issuance price of the tokens of Like through a bonding curve and through that offer liquidity and profitability to those investors that have invested now And want to exit before the 10-year mark happens and to give you a quick Like example and please don't quote me on this This is just a ballpark numbers to get a feeling of how the the dynamics would play out Let's say there's a 500k round right now and with those 500k These 500k give you two and a half percent of the company You see if we never raise another round if we make a hundred million dollar revenue The and say the company valuation was set at five extra revenue Simplistically saying this means a investor could make a 14x return if we're growing to the size of revenue that roughly slack and male Trim make the investor could make a hundred forty extra turn Now if we were to raise an additional 20 million dollars The dilution would bring those 500k in shares down to zero point four three percent And then also obviously decrease the The conversion price in the end so it incentivizes us also really strongly to be very mindful in raising extra money And not try to like raise for insane valuations just for the sake of it So now if we combine these two together redeemable equity and a rolling safe What it means is that again the company has economic freedom to internalize its externalities It is suitable for high-growth companies now It could provide competitive returns to DC by changing the ability of them having early liquidity early profitability But also less risk and that less risk comes from If our company is going to be valued by the value that we provide into the world meaning our revenue and profitability This means everyone knows we need to be profitable Like we need to optimize our company for actually making this money and as soon as we are a company that say Hopefully at some point to make a hundred million dollar per year then The chances that we're not gonna be able to return that money is just gonna massively reduce itself So there is a less risk for the investor to and the lastly and lastly With this model, it's also potentially possible to raise these one to fifty million dollars because now It's not anymore like every million that we raise will need we need to make two hundred million dollars more revenue Every million that we raise it's actually gonna get cheaper because it's always the same 20% that we're gonna later convert to Basically becoming debt that the company has now when it wants to redeem its own equity The next step for us is that we're currently setting up the fundraise with ferment. Hopefully we can start the raise in two weeks We're also in the next two to three years We're gonna put a lot of research into how do we actually make that equity conversion happen so how do we value the company for example, how do we value this thing and For anyone who's interested in collaborating and documenting on those approaches and the difficult questions around exactly How do we value this company? What are the tax and legal implications or how can we generally refine this model? Or if you are interested to implement this for your own company I'm always super open to have a conversation and figure out how this could might this might work for your context And you can reach me under my email address here only at memex.garden or my Twitter account or our company's Twitter account memex.garden so We might think that This sigmoid curve is the end like at that point in time the company will not grow anymore But I don't think this is necessarily necessarily the case look around yourself These microbiomes at some point evolved with their ecosystem into cells Evolved into humans that then invented shit that then went out and ventured and loved and dance and do all of these things And I think we can have the same thing for our economy too What we need is companies that have the intrinsic motivation to regenerate was broken in our society and at the same time Reward the people who actually built those economies with each other So thank you so much for listening