Brian: You spent two years in a big venture capital firm, and so part of me would web 2.0 was born out of venture capital, and if you’re part of the venture capital company (I’m assuming Soundcloud have venture capital), but even if they didn’t how do you go to sandhill road and go into the people and say guess what…we’re going to open-source it and connect everybody and we’re going to let the chips fall where they may. And guess what we’ll probably get exponential growth, triple-digit growth like we’ve seen in crypto assets.
But a typical VC from doing what they’ve been doing for 50 Years, that in their DNA is probably to say no, we don’t want to do that because that’s not the typical business model. Clearly, you’re not doing that but can you speak about that paradigm shift of a venture cap, that by nature doesn’t want to let go of that control because that’s typically where all the profits were?
Roneil: Totally. I spent two and a half years at Kleiner Perkins prior to founding Audius and the first round of financing that helped get Audius going in early 2018, was actually mostly traditional venture firms. In early 2018 Pantera and Blockchain Capital were the only two crypto-native funds that existed full stop.
There was no other crypto-native venture community. So we raised from those traditional folks under exactly kind of the pitch and the premise that you just laid out, and I think there are a few things there. Number one, venture folks love nothing more than to hear audacious ridiculous things that challenge them so the question we always got was how does Audius make money?
And we said well it doesn’t, we never make money we’re not ever going to make money but if this network is valuable this underlying token that powers it, (you can form your own conclusion around whether or not that might be valuable) and that’s actually you know what you’re engaging with as an investor
Our company doesn’t really have any viable business model long-term and that’s a very interesting distinction for them. I think it confused them but folks in venture, when they get confused actually get excited right?
Because it means that there is potentially a paradigm shift happening. And even if there’s a 10 percent chance that actually happens and a 90 percent chance that this is all BS, that’s still a good bet to make. So you’d be surprised actually how quickly folks were excited about it. But you’re totally right that the thing that got folks in venture excited about crypto originally, and this kind of movement towards decentralization was how disruptive it could be towards centralized business models.
Ultimately their fear of missing that transition, that’s another big driver of a lot of behavior in venture, but the folks that been along for the ride with us have been believers from the early days.
And one of them even had a specific thesis around what happened with Soundcloud and was actively looking to engage with and back something that could be resilient to some of those things that f where Soundcloud misstepped. So you’d be surprised how receptive folks were that financing was done in eight days.
Brian: And that’s back in 2018 when it wasn’t exactly the Bull market either?
Roneil: It was not. Although it was early 2018 so it was still the tail end of the 2017 market. I think it was clear to everyone that things were collapsing at that stage, but folks were still excited to back the next generation.
Brian: Now let’s get into the token because that’s where it becomes interesting, and again I like your SoundCloud comparison because I think we all went on there and used it back in the day, and it was great.
You had your music etc but obviously, then it seemed to not Evolve. How is Audius different? Because so far you’ve described it, it sounds very similar, but now comes in the token which really changes everything doesn’t it?
Roneil: It does. The AUDIO token as you mentioned has three kinds of core functions within the network. It secures the network. So with respect to all of the community members that host content, that host metadata, that do work that’s necessary to keep this network going. They stake that token and they earn rewards back to dominate in that token in exchange for the work they’re doing. The network is paying them in a decentralized fashion for that.
It also grants access to features, so as an artist there are a number of features that consume significant amounts of resources from the network. So as an artist you can similarly stake the token and participate in those staking rewards. But there’s a level of stake required for certain features to be unlocked and then it governs the network. That third piece is really where the resilience to management making poor decisions and/or management being misaligned with the community around the platform.
In the case of the Audius network, the community is management, and our company, the work that we do is done at the pleasure of the community and ultimately they can fire us, or say we’re not doing a good job or doing whatever they want. Once this launched it’s really in their hands more so than ours and the token-backed and based governance is how that is actually affected in the network so any code change, any functionality change on the network has to actually go through a token holder vote to accept or reject that change.
That’s really where this kind of unifier of incentives across the network we felt created this very powerful effect, where everyone was aligned toward making the Audius network as functional and as useful and as interesting as possible for its community.
You can watch the original clip of the interview on youtube.
https://www.youtube.com/watch?v=ijSsxI3rTiU
