Roasted Reflections

Welcome to Web3

“Where should I start?”

I hear this a lot when web3 terms like decentralization, blockchain, cryptocurrency, NFT, minting, gas fees, DAO, smart contracts, dapps, metaverse, tokenomics, and wallet addresses emerge in conversation. This month we’ll explore this futuristic frontier together!

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Before we drip in, it’s good to recognize that there is already a ton of research, content, and resources around web3 online. I share this disclaimer to add an approachable sense of lightness here. My goal is to share some early observations while teaming up with a few web3 crusaders to help translate a few compelling concepts. Whether this voyage is the first time you’ve heard of web3 or this is just another island in your ongoing exploration, pour another cup of curiosity and let’s drip in.

Back in the 1990s, we dialed up and waited for CDs in the mail to avoid paying for every minute of access to the world wide web. This early version of the Internet was built by developers and primarily delivered content in one direction. Websites were static and really only available for people to read. This read-only experience is referred to as web1.

With the rise of personal computers and online connectivity growing fast, around 20 years ago, the Internet started paving a two-way street. Remember endless chats on AIM? How about the sense of belonging on bulletin boards, the first time you managed your own content on a website, or the time spent designing your MySpace page? The ability for everyone to read AND write into the Internet is our current state and can be considered web2.

As supercomputers landed in the palm of our hand, the bionic connection to machines accelerated the connectivity worldwide and ushered in our connected era. While such affinity allows us all to do more with less, the platforms that support this connectedness have become centralized. This gives immense power (and liability) to organizations that control ownership, data security, privacy, and scalability. As our shared dependency on technology fed web2 archetypes, humanity became numb to the endless exchange of our personal data for convenience. This convenience has activated absolute accessibility, but how can we now use the connected era to power what’s next?

web3 is a concept that describes the future of how we will connect, communicate, and collaborate online. Web3 technologies strive to optimize opportunity with distributed, permissionless, transparent, proportionate, and verifiable decentralization. If web1 was read-only and web2 is read+write, web3 is read+write+own.

If your jargon alarm just exploded, it’s because this space is still undefined. There are few industry standards, as we’re in the midst of labeling a wide variety of efflorescent activity. One interesting thing about web3 jargon, is that it often describes things we already know. Advancing technology supports key attributes that make web3 concepts different, but here’s what I mean. Currency for instance, is the oldest story humans have used to exchange value. Access to a securely shared database is old hat for web2 wizards. We’ve lived in Sim City long before the metaverse, everyone already has flight tickets landing in digital wallets, and communities always thrive when they are brewed from within. That warm take is not to discount the magic that may be web3, but instead, to make it feel less distant. As web3 concepts move through the technology adoption life cycle, innovators and early adopters will continue to agree on terms that help translate the way different technologies work together. Tomorrow is today and as innovative ideology is normalized by mainstream adoption, it will be fascinating to see what concepts prevail.

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No AI support was used in this writing.

Let’s temporarily terminate this approachable welcome to web3 by chewing on key terms. With this being a working draft (current version below) supported by linked resources, take one more minute to give yourself a serious boost of confidence as we continue to explore web3 together.

Decentralization – Sufficiently transitioning from single authorities to proportionately deliver verifiable ownership, access, control, transparency, communication, and governance to many stakeholders.

Dapp – A decentralized application built on a decentralized network that combines a smart contract and a frontend user interface. <more on dapps>

Wallet – This is your tool to access the world of web3. A wallet is used to interact with dapps, store public/private keys, and connect digital assets to a specific network location. Each wallet has a unique wallet address that can be used for cryptocurrency transactions and digital signatures. <more on wallets>

Wallet Address – Wallet addresses refer to a specific location on a network and look like this: 0xb794f5ea0ba39494ce839613fffba74279579268. These hexadecimal strings are generated from the wallet’s private key, which is required to securely send or receive data from one address to another. Like URLs for a website, ENS masks long wallet addresses with more approachable names like yourname.ETH. A wallet address can be treated similar to an email address and shared with care, while seed phrases and private keys should never be shared.

Blockchains – A decentralized immutable system that records every transaction with transparent logs on a dynamic ledger. There are private/permissioned and public/permissionless blockchains, with different levels to build on. <more on blockchains>

Smart Contract – Code-based agreement that establishes terms for how a transaction is executed for stakeholders involved, automated governance, arbitration procedures, and more. <more on smart contracts>

Cryptocurrency – Fungible assets used to support immutable financial transactions between stakeholders. There are four categories (payment cryptocurrencies, tokens, stablecoins, and central bank digital currencies) and over 20K+ different cryptocurrencies that total a market capitalization of $850B+, with Bitcoin (BTC) and Ethereum (ETH) maintaining the largest market caps. <bitcoin white paper>

DeFi – Acronym for decentralized finance, which helps to weave cryptocurrency into the existing financial industry. <more on DeFi>

NFT – Short for “non-fungible token”, these are unique digital assets that use smart contracts to connect to blockchains, which autonomously applies, tracks, and transfers digital signatures and verifiable ownership. Non-fungible means that something is unique and can not be replaced. In contrast, physical money and cryptocurrencies are fungible, as they can be traded or exchanged for one another. <more on NFTs>

POAP – A proof of attendance protocol, which uses NFTs as tickets for an event or attendee confirmation at IRL (in real life) and online events. <more on POAPs>

Minting – The process of locking a cryptographic asset (such as an NFT) into a blockchain.

Airdrop – Giveaways sent to a digital wallet. They provide a creative way for people to share assets with each other, with senders usually paying any gas fee. Be skeptical of anything you receive that is airdropped from an unknown source. Like clicking links or opening attachments in emailed spam, there are poisonous airdrops that can force access into your digital wallet when a malicious item is transferred. To be safe, if an unrecognized airdrop lands in your digital wallet, leave it alone.

Gas Fee – One-time transaction fee to cover the dynamic costs of computing, electricity, and network verification required to interact with blockchains.

DAO – Acronym for “decentralized autonomous organization”, which can be compared to organizational structures like co-ops, LLCs, or venture capital firms. The specific structure, treasury, rules, and governance depend on the DAO and the group’s collective goals. <more on DAOs>

Metaverse – Interoperable virtual environments where users can interact with each other from anywhere. The rise of virtual and augmented reality has led to more immersive experiences.

Tokenomics – The abstract study of how digital assets work within social economic frameworks. Theories can range from how value is strategically perceived within a small DAO, all the way up to the global economy.

V1.1
By Ben McDougal, ago

Fresh Powder

After a gondola ride, whether you ski or snowboard, you’re not getting far without the right equipment.

Let’s imagine you’ve made it to the top of a snow-covered mountain. The distant view is inspiring and there are endless ways to enjoy the ride back down. Similarly, there are endless ways a business can evolve.

Financial modeling is an important technique that helps us simulate different scenarios for a business.

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This contribution was written by Jeff Erickson. Jeff is an investor, advisor, and skier on the silicon slopes of Utah.

A financial model helps forecast the financial performance of a company. They are based on the company’s historical performance and assumptions about the future. This tool can be used to make better decisions when raising financial capital and to assess potential returns of a given venture.

Returning to our mountainous metaphor, think of financial models as your map of the snowy terrain. It provides an overview of the area, routes to explore, and dangers to avoid. Like a trail map, financial models use numbers to set the scene, then help us determine the speed and direction of our business. They also help identify potential risks and optimize how different types of resources are used.

A financial model is essentially a roadmap for the future, and it gives investors an understanding of how you plan to generate revenue and scale over time. A solid financial model demonstrates that you have done research into the market, understand potential risks and opportunities, and have thought through the key drivers for success. Your financial model helps investors see how you think about your business and whether you understand the levers that matter. It also gives them confidence when they see that you know how to strategically allocate the money they may invest and that you know how to manage cash flow.

Most investors speak in the language of finance. Terms like run rate, CAC, LTV, runway, and burn rate are common vernacular. Building your financial model helps you learn, decipher, and understand this language of finance, enabling you to more effectively work with investors.

A common mistake is thinking that it’s you and your financial model versus the world. Instead of falling in love with assumptions, work with potential investors by using the financial model to analyze various scenarios. When founders can cruise down the mountain with investors while using a financial model to explain different scenarios in real-time, partners will get more excited about taking the lift back up for another run.

Entrepreneurs need to be aware of the changing terrain to make the best decisions for their evolving business. Let’s avoid the trees and carve out a few steps that will land you in a position to know the numbers.

Define

Before building a financial model, it is important to define the company’s business model, revenue streams, and financial objectives. This information will determine how you structure assumptions for the projections to accurately reflect what could realistically happen with your business.

Gather

Once you define company goals, gather historical data relevant to creating accurate projections. This includes past sales, costs for running operations, generating revenue, customer acquisition, and any other financial data that may help tell the story of your business.

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Prevent that new business idea from floating toward someday by compiling relevant resources that brew confidence in getting others excited to join you.

Build

Using qualitative (industry trends) and quantitative (past results) data points, build realistic assumptions to drive your financial model. This can be done using spreadsheets, but dedicated software makes it easier. With a framework in place, begin with customer acquisition data (sales outreach, paid ads, referrals, etc.). Next, make assumptions around revenue streams by considering all the ways you can make money (product sales, services, advertising revenue, etc.). Continue by including resources related to building a team, then focus on any changes in operating expenses. Finally, consider any required expenses to scale your business and how to finance the venture long term.

Validate

Once initial assumptions are plugged into a financial model, it’s important to track the accuracy of your assumptions each month and to update the numbers based on actual data. With metrics consistently tracked over time, your financial model becomes more accurate and reliable. You will notice trends in customer acquisition, identify the most profitable revenue streams, and monitor your expense projections. Additionally, you will be able to run different scenarios using your financial model to help you confidently make better decisions in running your business.

As we add financial models into an investor pack, dynamic understanding is supported by an interactive tool to project progress. This shared awareness brews confidence and helps more people enjoy the ride in a shared direction.

By Ben McDougal, ago

Attention Traps

As early moves are sequenced, a few creative assets can help founders translate emerging insight into valuable snapshots of the business. One-pagers, pitch decks, and investor memos are additional types of attention traps that entrepreneurs can use to ignite interest.

One-Pager

The one-pager is a punchy asset built to describe the most important elements of your business. Concise is nice, as the goal is to create immediate intrigue. One-pagers should be made to be seen by anyone. This means you must find a balance in giving enough details to show substance and realistic potential without giving away the secret sauce.

While you may know a lot about your business, the goal is to guide others through new layers of understanding. As you consider what content to include and how to format so much goodness into such a tight document, focus on creating curiosity to keep conversations flowing.

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The FliteBrite one pager from 2015.

 

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My guest column on consistency in the Business Record.

With a one-pager ready to share, invite feedback as you build confidence by sharing it with strategic investors, partners, and those who may kindle fresh progress.

Pitch Deck

Slide decks support a verbal presentation. Pitch decks add more information to help recipients (often investors) learn about your venture. With 10–15 slides, present the story of your business with eye-catching visuals, data-driven details, and links to more supportive content. Keep this asset concise and entertaining. Do so while identifying the market, problem, solution, signals of traction, moat-digging differentiators, team, competition, the ask, compelling calls to action, and contact information.

Knowing this attention trap is most often needed by founders raising financial capital, even if it’s in a closing appendix, it’s good to include more data-driven details to show research-based comprehension. Like back slides that support Q&A portions of a verbal pitch, market research, conservative financial projections, how money will be spent, and customer discovery results are all ways to prove you understand your business plan and how the numbers work.

That said, don’t numb readers. Avoid small font and word salads. Incorporate imagery that supports a captivating story. Translate your mission while making it clear how this venture will deliver serious returns. Like the one-pager, pitch decks are not crafted to secure an investment. They are designed to fuel interest and more conversation.

Investor Memo

Commanding an influential investor memo keeps people informed with the ongoing progress of your company. Along with sections you include in a pitch deck, investor memos create space to highlight the evolving details of your fundraising campaign, key performance metrics (KPIs), data visualizations, recent milestones, multimedia, needs of the team, and future goals for the company. Online platforms make it easy to manage dynamic, accurate, and interesting investor memos. The quick-to-digest but also real-time information is why investor memos are popular among well-articulated founders raising venture capital.

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If you can’t explain it simply, you don’t understand it well enough. -Albert Einstein

With these attention traps set, alternate versions of each asset may help you share impactful details with the right audience. For example, a pitch deck for local angel investors may be different than a pitch deck for a global venture capital firm.

Connecting everything adds efficiency but maintaining a well-organized data room is not for the faint of heart. As any company expands, so will the need to update different types of attention traps that support an evolving story for a growing variety of onlookers.

 

BACKGROUND CONTEXT
We had spent all month exploring early moves to evolve business ideas into reality. Using our time dedicated to no-code wireframing, actively listening to others, telling customer stories with a colorful business model canvas, and escorting execution with business plans, to translate emerging insight into snapshots of a business. The one pager, pitch deck, and investor memo are distinct types of attention traps entrepreneurs can use to connect with those who care.

By Ben McDougal, ago

Escorting Execution

After a few early moves, developing a business plan is a hearty exercise. Business plans are less pivotal than scholars may preach, but developing a business plan does force you to pick through the specifics of any business. The detailed planning can pave a path toward sustainability and help you articulate opportunities to potential co-founders, new hires, outsourced talent, investors, and early adopters.

The first version of a business plan does not need to be long, but it should include a handful of key elements:

    1. Executive Summary
    2. Company Description
    3. Market Analysis
    4. Products & Services
    5. Marketing & Sales
    6. Operations
    7. Financials
    8. Appendix

One size does not fit all, and earlier moves like canvasing and wireframing will lighten the load as you flesh out details. To determine how particularized your business plan needs to be, consider who will be reviewing this dynamic document. Learn more and explore different templates online, then craft something you’re proud of.

Even without an audience, creating a business plan is rarely a waste of time. They can also become a required asset when you’re raising financial capital. Situations where you’ll likely need a business plan include grant applications, bank loans, and pitch competitions. Entrepreneurial support organizations (ESOs) may request a business plan to warrant professional services as well.

As you build a business plan, use clarifying frameworks, concise content, and mark areas that may need to more frequent updates. This makes the document interesting, more digestible, and easier to maintain.

As you update this dynamic document, consider how your business plan supports other related resources that collectively paint the picture of your company. Sharp business plans integrate with a cool one-pager, slide decks that ignite verbal presentations, a pitch deck with similar content brought to life with enhanced visuals, and ongoing investor updates. This shapes a forwardable investor pack geared to keep your ideas from slipping toward someday.

By Ben McDougal, ago

Recursion

The achievement of writing every week for two years has me considering the future of this ambitious frequency.

For most of us, the recurring year-end audit includes a look back on how we spent our time. I love how writing helps me coordinate, understand, and translate thoughts, but the contemplative time poured into Roasted Reflections has also required intentional, lasting dedication.

As I sip on The Holiday Walk, considering what’s next, I wonder if I should give myself a break? Reducing the frequency would add ease and would subscribers even notice? Increased personal bandwidth and self-doubt aside, I still really enjoy shipping this art and I love considering how my writings will help unfold a life well lived. Along with personal growth, hearing how these weekly jolts help people is deeply rewarding and I believe we collectively have more to share.

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Ready to write more? Let’s collaborate on a Caffeinated Contribution!

Recursion is a computer science term that describes the process of defining a problem in terms of itself. This form of problem solving divides a problem into smaller parts of the same type. I’m quick to encourage others to start/continue writing so I’ve decided, at least for now, to keep building. By writing, I will uncover why and what to keep writing. Expanding this web of thoughts will feed an intrinsic motivation toward perpetual learning and will remained brewed to keep you building as well.

By Ben McDougal, ago