Folius Ventures: The Explosive Logic and Future Evolution of Friend.Tech.
Original Title: "Short Story: Happy to Have Friends from Web3 - At the Intersection of Social and Crypto Chaos, Friend.Tech Sounds the Assembly Call"
Original Author: Jason Kam, Partner and Investment Manager at Folius Ventures
Original Source: Folius Ventures
Review of Friend.Tech's Development
• Product stitching is just right: PWA is a suitable choice for social lightweight products, giving old technologies new scenarios, and bypassing the App store, which is not friendly to Web3, is quite critical. In addition, the integration of Web2-like login methods reduces the threshold, binds Twitter accounts to get initial traffic for free, and the joint curve design makes liquidity in and out convenient. Base/OP Stack makes a good choice on the lowest security and ultra-low cost of social/small amounts, and the maturity of USDC offshore dollars. Stitching them together allows Friend.Tech to smoothly promote and convert under the limited infrastructure of Web3, and successfully achieve the business model of "CT drainage, FT monetization".
• To some extent, it solves the pain point: In the Web3 community, whether it's X, Discord, WeChat, or TG, there is no good network similar to knowledge planets such as Zhi Shi Xing Qiu, De Dao, or expert consulting, where high-value individuals can monetize their attention and knowledge in a one-way, low-noise, and comfortable manner. Friend.Tech fills a market gap to some extent, making it possible for individuals with the highest cognition and earning ability in the industry to be reached through direct payment.
• Speculation effect and early KOL strategy overcome cold start: In the midst of an industry narrative vacuum, Friend.Tech initially gained a large amount of traffic by directly giving cash to Twitter KOLs and sharing 5% of the profits with homeowners through user purchases of Keys. Users' expectations of KOL appreciation and the wealth effect after the pull-up were realized, achieving the project's first wave of cold start. The project's airdrop expectations and potential to break through the circle also attracted a group of loyal creators who continue to create content and maintain the project's DAU activity.
• Paradigm Core Second-Level Rocket Empowerment: After the first wave of dividends declined, Paradigm, as the top institution in the industry, led the investment to lay a strong foundation for project development. The expectation of future coin airdrops and the significant increase in valuation represent a substantial increase in user willingness and amount of investment. The strong background of the investment company also means that many small issues and legal issues are likely to be resolved, greatly reducing the risk of running away, and also greatly boosting user usage and investment willingness.
• Iterating quickly on the right path: Friend.Tech, as a product, falls short when compared horizontally to the Web2 circles in China/Asia-Pacific. Fortunately, it has been continuously iterating on the right path for the core goal of helping homeowners monetize and providing users with a smooth experience, and has been very pragmatic in implementation. From the refresh speed, reply function, cross-chain + deposit function, global comparison/ranking interface, image function, and other features, the team's 996 ability is expected to continue to improve and ultimately reach the passing line of Web2.
Friend.Tech's point system and airdrop expectations make holding Key and speaking become a disguised form of Pool2 mining
Friend.Tech's point system and airdrop expectations have turned holding Key and speaking into a disguised form of Pool2 mining, and it is also the only way to obtain its exposure. Currently, the potential return rate is high.
Currently, the popularity of Friend.Tech is largely due to its expected token issuance - for heavy participants, their cognitive framework is based on the possibility of converting every 1 point into a token airdrop worth 1-5 US dollars, or mining with an APR of 200-500% or even more based on the participation amount:
• Friend.Tech will distribute 100 million points within 25 weeks. The general consensus is that points represent token airdrops, and are strongly related to the total amount of Key invested, holding time, and in-app activity (clicking, duration, speaking, etc.).
• As shown in the table below, if Friend.Tech ultimately issues 1.5Bn FDV tokens, with 10% allocated for airdrops, and an average TVL of 80mm over 25 weeks, and the airdrop ratio is proportional to the TVL participation, then the final annualized airdrop rate is approximately ~360%.
• Purchase KEY, maintain activity, and product friction thresholds have hindered the entry of large funds. However, we believe that with the improvement of industry awareness, product iteration, the improvement of supporting financial facilities, and the entry of Silicon Valley, Asia-Pacific, and traffic-oriented individuals, TVL and KEY prices may rise significantly.
• It is worth mentioning that currently Friend.Tech refuses to engage with any VC except for Paradigm. Therefore, we believe this is an opportunity for retail investors and secondary funds, and mining may also be the only way to obtain exposure to the company.
About PMF: For general professionals, quick reputation monetization represents a profit of $1,000 to $10,000 in the short term.
• Subscription price = Sell price * 0.9 - Buy price * 1.1. In other words, when the price rises by 22%, the user can subscribe for free. According to the conversion formula, if the Keys holder increases by 1%, the user can "freeload" after buying again.
• The final pricing should fall around 20% of the cost of multiple consultations by a single user (one in, one out). Based on the current price of Ether and the pricing of industry consultations for hedge funds (between $500-$1000 USD per hour), the number of top-paying consultants should be around 150-215, with a single Key priced at around 1.4-3.0 Ether. Interestingly, this number of Keys, assuming a single user can hold multiple Keys, is roughly equivalent to the Dunbar number of 150, which is the maximum number of individuals a person can maintain a stable social relationship with. Therefore, we believe that the design of the equation (S^2 / 16000 * 1) is intentional, and the price range of 1.5-3.0 Ether per individual is what we consider to be a normal price for industry experts after the hype has subsided.
• The public's perception of reputation and professionalism will quickly push prices to a reasonable range. The thrill of discovering and profiting early is addictive. The high profit sharing can also give influencers a quick sense of income, further helping to promote the platform and accelerate network effects. An influencer at the 50/100/150 key nodes can earn a minimum of about $200/$1700/$5600 purely through royalties. If they were able to hold 3 keys at a low price early on, selling at the 50/100/150 key nodes could earn them an additional $750/$3000/$6750. For most professionals, the temptation of quickly earning $1000-$10,000 is enough to keep them participating and promoting daily.
前期爆发收入与后续收入问题 – Friend.Tech 必须引入持续付费机制
translates to:
Early explosive revenue and subsequent revenue issues - Friend.Tech must introduce a continuous payment mechanism
During the follow-up period, a decrease in KEY+ token price <-> may lead to a death spiral caused by user abandonment.
We believe that Friend.Tech will inevitably face the problem of high pricing by later landlords, saturation of Key holders who are reluctant to sell, and insufficient cash flow due to potential users' lack of purchasing power. After the early landlords have cashed in through option fees and Key sales, they will inevitably face the problem of insufficient momentum. We believe that for Web2 traffic core and high-end professionals, Friend.Tech must open up a continuous pay-per-use model for external and internal groups:
• We believe that its design needs to be accompanied by differentiated pricing for those with and without keys, referral links or profit-sharing mechanisms for key holders, and appropriate free disclosure based on unlocking time or other methods in order to achieve effective and sustainable monetization for homeowners.
• Assuming that we cannot achieve this smoothly, we believe that the user churn rate will increase significantly with the sale of KEY and tokens during the downward cycle after the user base reaches saturation, further affecting the price of KEY and tokens, forming a two-way death spiral.
Assuming sufficient execution capability, Friend.Tech may still have at least two peaks of DAU impact in the future.
We anticipate that, with sufficient execution, Friend.Tech may still experience at least two peaks of DAU impact in the future. After this, it is essential for the product to form sufficient network effects and quality.
Potential Participants in the Future:
• Silicon Valley VC + Silicon Valley entrepreneurs: Radiating through Paradigm and current Web3 community.
• Numerous VCs, founders, opinion leaders, crypto traders, and tech professionals in the Asia-Pacific region: see through the wealth effect radiation from west to east.
• People from all walks of life who are not in the Web3 industry, especially those in high-net-worth niches: It is important to continuously expand the business of the company and pay for GTM (go-to-market) expenses. Attracting opinion leaders with cash and tokens is crucial.
• Directly configure Web3 native liquidity funds to obtain airdrop opportunities: We believe that when general liquidity funds can purchase KEY-like ETFs with one click and directly enjoy potential airdrops, large amounts of funds will flow in.
• The wealth effect that comes with new users and TVL will increase the token valuation, while attracting more existing users' stock funds. We believe that the strong airdrop expectations will keep the product hot until January-February 2024.
Necessary Function Addition:
• Recommendation reward: Adding profit sharing can help influencers monetize faster and better. • Additional encrypted or paid content in the group: Helps influencers continue to monetize.
There is still room for improvement in the joint curve - the team has made good trade-offs in simplicity
Currently, the product form of Friend.Tech is pure and simple: a concise and easy-to-understand unified curve that is suitable for high-value KOLs that bring real benefits. However, it also has its limitations - when user portraits are expanded, not every user is suitable for this type, and even KOLs need to make segmentation on their own users. We believe that giving users the right to choose several options (such as 3-4 different curve forms) and implementing it in a simple way, Friend.Tech can reach a larger TAM:
• KEY with monetization and fixed price: Fixed price instead of x^2, with the majority (such as 90%) of the revenue going to the homeowner instead of just 5%. This way, key holders can expand to thousands of people, similar to OnlyFans. By adjusting the utility of the key, generalization can be achieved more quickly.
• KEY to strong knowledge payment model and S-curve pricing: Price convergence after marginal users (similar to S-curve) instead of x^2, which can stabilize the acquisition cost for the vast majority of users in the later stage, while also accommodating early speculative users and being more suitable for expert talent.
• Event-driven, with multiple S-curve pricing KEY: Similar to the above, but with room for further price increases after breaking through different user bottlenecks. Suitable for celebrity-type landlords, can be combined with Referral Link to drive user-generated promotion, thereby breaking through the platform period.
Fortunately, Paradigm's expertise in mechanism design and mathematics can greatly assist the Friend.Tech team.
Long-term holders of high traffic, high stickiness, high net worth, and long-term product cultivation homeowners may be able to maximize Points acquisition
If maximizing Points is used as the logic for configuring the KEY, then the homeowner who holds high traffic, high stickiness, high net worth, and long-term product cultivation may be the most suitable.
The airdrop expectation endows KEY with value beyond knowledge consultation and identity authentication. Assuming that the final token airdrop result is strongly related to Points, the configuration goal should be to maximize the weekly Points acquisition. Although the team can make minor adjustments to the equation every week, we boldly predict that the conversion method is likely to be as follows:
Application internal activity (own + others) * KEY comprehensive asset price (own + others) * KEY holding time
Given this, before the formula is adjusted, the general guideline for maximizing weekly points may be as follows:
• Therefore, from a configuration perspective, a homeowner with high traffic, high stickiness, high net worth, and a reason and willingness to develop their own brand within the product in the long term should be the best choice for long-term holding in order to maximize Points. Interestingly, these users should have also received quite good Points in the past four weeks, so perhaps this can also be used as a screening criterion.
We believe that in terms of product form, Friend.Tech has some of the features we love to see when observing Web3 consumer products. In other words, this product can fully leverage the characteristics of the Web3 value network to help it succeed:
Low cash cost incentive customer acquisition to achieve economies of scale: Through its own speculation and wealth effects, as well as the wealth expectations of airdrops, Friend.Tech can quickly and almost costlessly acquire highly loyal users within a certain period of time. The token itself has the potential to be a multiple of cash flow, which is one order of magnitude higher than the intensity of cash purchase for new users. Of course, if the team cannot solidify itself before these benefits disappear, the users brought by its Web3 add-ons will most likely leave quickly; but as a social product that urgently needs to achieve economies of scale and is strongly related to attention/knowledge monetization, it seems not to be such a bad choice.
Dependence on external liquidity and deep taxation of the economy: Key itself, in addition to the financial leverage brought by the airdrop expectation, also comes with a one-time payment multiplier. In other words, the current KEY is a comprehensive body of Friend.Tech's own equity and the homeowner's own cash flow value multiplier. On this basis, the intensity of the 5% commission income far exceeds that of ordinary Web2 companies. In addition, we can fully anticipate the future taxation of highly financialized products and the taxation of pay-per-view rewards. In addition, after the company has grown in scale, the drainage given to other projects, and even the water extraction intensity as a traffic entrance, are all worth looking forward to.
Risk
As a social vertical product with strong financial attributes, Friend.Tech faces many risks in its development path.
• The project can completely choose not to issue tokens in the end, or the airdrop can be unprecedentedly small: Therefore, for participants, it is very important to participate earlier and strictly control the loss of ETH-based cross-cycle.
• Unable to break the circle and collapse in advance: Currently, the product has a high coverage of Web3. If the circle cannot be broken, all assets will be at risk of depreciation.
• High withdrawal fees: The withdrawal fees for buying and selling are very high at 10%. This may cause strong dissatisfaction as the product develops and the base increases.
• The potential significant risk of KEY being defined as a security in terms of its own regulation cannot be eliminated and must rely on the legal team of the paradigm itself and the company's clever design.
• High product execution risk: During the company's growth process, due to its strong correlation with finance, every step of function update and continuous rapid iteration/problem elimination is accompanied by a great risk of collapse. The team needs to handle everything very robustly. In addition, the product itself is still below the Web2 benchmark in terms of level, and the user experience is poor. If it cannot be improved, problems will arise in the subsequent expectation elimination.
• With the fluctuations in DAU and price, an inevitable financial cycle is brought about: KEY itself will have strong volatility and periodicity due to changes in airdrop expectations, user entry speed, and price itself. This comes with a significant risk of permanent loss, and the team must manage expectations and iterate steadily during this cycle.
• Long-term retention risk: Friend.Tech may become a niche product due to the high cost of KEY for the general public after the tide recedes, which may not support an expected high FDV. The failure of Clubhouse and many other niche social products is a warning.
• Private key and Web3 asset security risks: Due to the custodial mechanism and smart contract-based wallets, there is a risk of being hacked, which must be taken into consideration.
• Team anonymity risk: The team has no actual responsibility towards the users. Of course, this has been reduced to some extent with the participation of Paradigm, but the reputational risk of the semi-anonymous founding team still exists.
• Content risk: It is obvious that this type of content platform has a high risk of violating any country's laws. As the platform grows, it will inevitably face many challenges in terms of review and regulation. The team needs to have great patience and preparation to meet all of this.
Risk Warning: Readers should not interpret the content of this presentation as legal, tax, investment or other advice.
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