Justin Ahn, co-founder of Quidli, shared his thoughts on the future of programmable equity and what challenges startup founders see with cap-table.
Hello! What’s your background, and what are you working on?
My name is Justin Ahn, and I’m one of the founders and the CEO of Quidli.
Prior to getting into DeFi, I worked in financial services (in M&A advisory) and then in tech (in e-commerce, SaaS, edutech) in Asia and in Europe. I met my co-founder, Florent Bolzinger, when I pursued an MBA in France in 2013. Florent was obsessed with what was going on with Bitcoin at the time, and so for a class project we proposed building a BTC exchange; long story short, our prof strongly advised us against it, and so we pursued other startup projects separately. We stayed in touch, however, and revisited crypto in 2018 when the ICO hype was at its peak. And this time we were absolutely certain we didn’t want to miss out.
At its core, Quidli is a dApp for issuing and managing team equity on Ethereum. The interface is designed to enable companies, projects, communities, etc. interested in building more inclusive work cultures to easily share real value with anyone who creates value using security tokens built on ERC-1400 standards. We work to eliminate as much of the technical friction as possible in the employee equity tokenization process so that distribution can be more flexible.
This is because as businesses lean into building deeper relationships with participants and stakeholders beyond investors and full-time employees, they need more tools to reward and incentivize these groups. And flexible equity, with programmable rights and restrictions that help ensure compliance, is a great foundation that enables building more inclusive companies and organizations because value becomes easier to share and more transparent for all sides.
What’s Quidli backstory?
Quidli is actually the brainchild of Florent, my co-founder who I met in business school.
For his previous tech startup Skylights, Florent started with no money and no workforce. But he was inspired by Mike Moyer’s Slicing Pie to bootstrap development using a model for dynamically splitting equity between co-founders for their respective contributions. But he kept tweaking the model to include anyone, even freelancers, to leverage his strongest potential asset in a more liquid way for incentivizing good talent to contribute when and where they could. And after recruiting and building over the course of a year using a “work-for-equity” system, he was validated when Skylights was accepted into and backed by Y Combinator in 2016 and was able to reward the early contributors in the next round of fundraising.
Florent was convinced employee equity distribution made easier and more flexible is a bigger product in itself. So he approached me to start a new venture related to the “future of work.” And as we both love working on early-stage startups, we started exploring the concept, reached out to big companies experimenting on sharing equity, either to save cash or to build more inclusive work cultures, like Hyperloop Transportation Technologies and Airbnb; and we learned even they face issues on the tracking and compliance processes.
At the same time, we were witnessing ICOs and how they were effectively incentivizing public participation via “bounties,” and utility tokens, which we understood was powerful yet not exactly legal from a regulatory perspective. But on a valid security token managed by smart contract, equity distribution could become much more flexible and used for quick, fractional one-off rewards, performance-based incentives, work-for-equity models, etc.
With this in mind, we started building a decentralized work-for-equity platform in Q2 2018 using our own company as a way to “dog-food” the development. We tracked all labor and money put into Quidli to dynamically calculate our splits while getting in place the legal framework to ensure every distribution is valid and compliant. This enabled us to enlist contributions, both full-time and part-time, from developers, lawyers, graphic designers, videographers, technical writers, etc. who are motivated by our “doers as owners” culture and are now all officially shareholders in one form or another. In fact, our third co-founder Guillaume Figielski, initially joined as a freelancer. And though we effectively missed the ICO boom, we had enough momentum to attract the attention of Tachyon, the ConsenSys Ventures accelerator, who became our first external investor in Q3 2018.
Certainly there’s a lot of work and luck involved in building a venture-backed startup. But at Quidli, we’re working to prove that work-for-equity can be a powerful tool for building new companies.
What went into building the Quidli?
Quidli has been a journey, to say the least - we’ve undergone three iterations since first launching in Q3 2018. This first dApp was based on a share-per-hour system via ERC-20 tokens, and we focused on non-crypto/blockchain companies for business development. We quickly learned:
- Shares per hour is really niche and all the 25 companies we onboarded as early users eventually wanted to share shares based on their own calculation methods; and
- “traditional” companies are open to software solutions, but not if they have to deal with blockchain actively. And so our next release in Q1 2019 was a complete 180 as we focused on more natural employee equity distribution with absolutely no blockchain element. And what we ended up building was a legal document generator, but since the templates were only for US Delaware C-corporations, we were extremely limited compared to existing solutions like Clerky or LegalZoom.
In the current relaunch of our dApp, we’re taking a piece-by-piece approach, focusing more on removing the technical limitations on sharing equity with your team. We’ve been using a lot of the ERC-1400 standards made publicly available by Polymath to build the experience around security tokens for a company’s contributors, whether they be employees, freelancers, business partners, etc. Thanks to our previous version, we can offer documentation templates for the US and French companies. But this time we’re not limiting companies from using their own documentation, which is particularly interesting for prospective users from other jurisdictions who’re willing to trailblaze; or for groups interested in issuing community tokens that don’t necessarily need documentation. We love interacting with companies and groups from not necessarily our target countries who see the advantages of what we offer and are willing to experiment themselves.
Across these iterations, we’ve taken in a lot of key learnings. Most importantly, I think we understand much better now where we stand in the DeFi space. We weren’t really an active part of the greater Ethereum community before and so we’ve been making more of an effort to share our progress and seek out other DeFi bricks that make sense for us to collaborate and integrate with - for example, imagine combining Quidli with a salary dApp to offer more flexible compensation packages!
There’s definitely a lot more exciting things to do with tokenized equity outside of fundraising and STOs, which is where a lot of the focus is today. And through it all, ConsenSys continues to be really strong advisors and partners - everyone in the organization we’ve interacted with is committed to advancing Web 3 and token initiatives on a mainstream level, and so we benefit from having them as one of our first major backers. We’re also, of course, appreciative of the open-source activities at Polymath, their work on ERC-1400 has been a real asset (no pun intended).
What’s your business model?
The business model we have in place is simple - we take a Github approach of: Free for companies and organizations with up to five shareholders/tokenholders; and a SaaS pricing of $1/month/person for groups with more than five (ex. 6 shareholders = $6/month). Our aim is to keep the barriers to entry as low as possible with the basic feature set today and aim to offer more premium features and possibly transaction-based pricing as we grow the platform out. I think this premise of forgoing more aggressive business models is more or less the same for many DeFi platforms at the moment, at least if you’re not an exchange!
Regardless, we put a business model in place as we do get requests for demos from larger companies that aren’t startups. The biggest prospective client we’ve spoken to is a small-cap company with over 2000 employees, which would require a lot of network activity to distribute. But most of our early user companies today are smaller crypto/blockchain companies. For now, this is an easier market for us to work in as we don’t have to spend as much time and effort explaining the value prop on the blockchain side; and many people who work in this space are already very receptive to the concepts of sharing more value and incentivizing work with token rewards.
In terms of market, we’re quite open. Each iteration has driven different client profiles to us. We get companies interested in turnkey solutions for giving equity to employees; those who want to apply KPI/OKR-based equity distributions; and even communities that want a more restrictive token to share with members as a form of non-securities rewards. While we’re inevitably compared to cap table management tools like Carta, we’re different as our focus is on the team side of ownership.
The big SaaS tools offer one-size-fits-all solutions mostly geared towards presenting information to investors when fundraising, which for employees, is quite limiting. They’re also highly centralized, which isn’t necessarily bad when you deal with securities, but this forces you into relying on one service provider for all transactions. Quidli is designed to be an interface that facilitates transparency and provides your team with more control to transact with their assets as they want.
What’s your position on the regulatory landscape today?
We’re in crypto so regulatory is a constant consideration, not just for us but for everybody interested in working in this space with legitimacy. Having said that, I think that longer-term it’s more convenient to work on tokens that deal with securities than working on the money side of things.
Just from the standpoint of how illiquid stocks are when compared to cash, it’s clear to see the friction points that can highly benefit and be improved while remaining compliant via tokenization and decentralization on the blockchain. Already with company equity, in the US, which can be considered a highly regulatory country, jurisdictions like Wyoming are very publicly and openly adjusting their legal frameworks to incorporate DLTs and tokens. And even Delaware, a hotbed state for company creation that isn’t publicly working on blockchain legislation, is at least acknowledging that DLTs can be used to define and store company ownership structures.
Compare that with how government reception of cryptocurrency is going, for example, most recently the US Congress on Libra, and I think you see that money fundamentally not being controlled by governments clearly touches a big nerve at the political level. Yet, for securities, I think we’re beginning to see, slowly albeit, a clearer pathway for finding success on the blockchain.
What are your goals for the future?
Following this recent release, our goals mostly revolve around pushing more users onto the dApp and then going after more VC funding. I think we’ve prepared ourselves well to start shipping new features, and integrations fast, but we’d prefer to have strong indicators backing what direction to take next concretely. Programmable equity can mean a lot of things, and we want to evangelize the advantages of being more innovative and creative with equity as compensation.
For Quidli, I see two challenges. The first is getting people and collaborators from different jurisdictions and geographies to feel comfortable dealing with the legal side of things. For us, we’re all about eliminating the technical frictions first as it’s very much possible to create real asset-based tokens today; and so we like working with fearless CEOs and founders who’ll actively collaborate to help set the scene for other companies in their respective regions.
Second is changing the mindset that equity is this precious thing that founders need to guard for themselves, or that it’s exclusively the domain of CFOs and lawyers. Certainly, problems can result from having screwed-up cap tables. But this kind of thinking is limiting for founders who really should be focused on growing. When we talk to early-stage startup founders, we see a real fear of openly sharing equity due to pressures of thinking about pursuing VC funding.
Reality is that startups able to raise VC funds are rare, and it’s even more challenging if you’re working on Web 3 today. So if you have no money, isn’t it better to use your equity as fuel to accelerate growth rather than stagnate because you don’t want to have a “weird” cap table? Even for companies with just founders working, why have an arbitrary split when you can create tokenized dynamic distributions based on contributions?
What are your future thoughts for the DeFi market?
We’re quite bullish on DeFi. As mentioned, I think one big challenge today is to drive more interest in spaces outside of crypto as just cryptocurrency or as programmatic money, which is one thing I believe initiatives like defiprime are working to raise awareness on. Obviously, the appeal is on that side today because of the monetary value that’s associated to tokens/assets like BTC, ETH, DAI, etc. and the plays with lending, interest, collateralization, etc. that can readily be rolled out in these cases.
In terms of finance as a full spectrum, however, we see the long term as more likely headed to a middle ground between absolute decentralization and an environment with an overabundance of unnecessary middlemen and services. I think most rational people can agree that many of our financial instruments and systems are riddled with legacy terms, conditions, and infrastructure that feel inefficient in today’s world. However, there’s certainly no way governments and state institutions will allow “cypherpunks” to wrest complete control outside of regulation and compliance, particularly when there’s value in some form being created. But, money is only one way to think about value.
There are other instruments to carry a value that can definitely be disrupted and made more accessible using DLTs and tokenization. And this will increasingly become a reality for companies and workers to consider as cryptocurrency grows more mainstream.