More on Entrepreneurship/Creators
Mangu Solutions
3 years ago
Growing a New App to $15K/mo in 6 Months [SaaS Case Study]
Discover How We Used Facebook Ads to Grow a New Mobile App from $0 to $15K MRR in Just 6 Months and Our Strategy to Hit $100K a Month.
Our client introduced a mobile app for Poshmark resellers in December and wanted as many to experience it and subscribe to the monthly plan.
An Error We Committed
We initiated a Facebook ad campaign with a "awareness" goal, not "installs." This sent them to a landing page that linked to the iPhone App Store and Android Play Store. Smart, right?
We got some installs, but we couldn't tell how many came from the ad versus organic/other channels because the objective we chose only reported landing page clicks, not app installs.
We didn't know which interest groups/audiences had the best cost per install (CPI) to optimize and scale our budget.
After spending $700 without adequate data (installs and trials report), we stopped the campaign and worked with our client's app developer to set up app events tracking.
This allowed us to create an installs campaign and track installs, trials, and purchases (in some cases).
Finding a Successful Audience
Once we knew what ad sets brought in what installs at what cost, we began optimizing and testing other interest groups and audiences, growing the profitable low CPI ones and eliminating the high CPI ones.
We did all our audience testing using an ABO campaign (Ad Set Budget Optimization), spending $10 to $30 on each ad set for three days and optimizing afterward. All ad sets under $30 were moved to a CBO campaign (Campaign Budget Optimization).
We let Facebook's AI decide how much to spend on each ad set, usually the one most likely to convert at the lowest cost.
If the CBO campaign maintains a nice CPI, we keep increasing the budget by $50 every few days or duplicating it sometimes in order to double the budget. This is how we've scaled to $400/day profitably.
Finding Successful Creatives
Per campaign, we tested 2-6 images/videos. Same ad copy and CTA. There was no clear winner because some images did better with some interest groups.
The image above with mail packages, for example, got us a cheap CPI of $9.71 from our Goodwill Stores interest group but, a high $48 CPI from our lookalike audience. Once we had statistically significant data, we turned off the high-cost ad.
New marketers who are just discovering A/B testing may assume it's black and white — winner and loser. However, Facebook ads' machine learning and reporting has gotten so sophisticated that it's hard to call a creative a flat-out loser, but rather a 'bad fit' for some audiences, and perfect for others.
You can see how each creative performs across age groups and optimize.
How Many Installs Did It Take Us to Earn $15K Per Month?
Six months after paying $25K, we got 1,940 app installs, 681 free trials, and 522 $30 monthly subscriptions. 522 * $30 gives us $15,660 in monthly recurring revenue (MRR).
Next, what? $100K per month
The conversation above is with the app's owner. We got on a 30-minute call where I shared how I plan to get the app to be making $100K a month like I’ve done for other businesses.
Reverse Engineering $100K
Formula:
For $100K/month, we need 3,334 people to pay $30/month. 522 people pay that. We need 2,812 more paid users.
522 paid users from 1,940 installs is a 27% conversion rate. To hit $100K/month, we need 10,415 more installs. Assuming...
With a $400 daily ad spend, we average 40 installs per day. This means that if everything stays the same, it would take us 260 days (around 9 months) to get to $100K a month (MRR).
Conclusion
You must market your goods to reach your income objective (without waiting forever). Paid ads is the way to go if you hate knocking on doors or irritating friends and family (who aren’t scalable anyways).
You must also test and optimize different angles, audiences, interest groups, and creatives.
Navdeep Yadav
2 years ago
31 startup company models (with examples)
Many people find the internet's various business models bewildering.
This article summarizes 31 startup e-books.
1. Using the freemium business model (free plus premium),
The freemium business model offers basic software, games, or services for free and charges for enhancements.
Examples include Slack, iCloud, and Google Drive
Provide a rudimentary, free version of your product or service to users.
Google Drive and Dropbox offer 15GB and 2GB of free space but charge for more.
Freemium business model details (Click here)
2. The Business Model of Subscription
Subscription business models sell a product or service for recurring monthly or yearly revenue.
Examples: Tinder, Netflix, Shopify, etc
It's the next step to Freemium if a customer wants to pay monthly for premium features.
Subscription Business Model (Click here)
3. A market-based business strategy
It's an e-commerce site or app where third-party sellers sell products or services.
Examples are Amazon and Fiverr.
On Amazon's marketplace, a third-party vendor sells a product.
Freelancers on Fiverr offer specialized skills like graphic design.
Marketplace's business concept is explained.
4. Business plans using aggregates
In the aggregator business model, the service is branded.
Uber, Airbnb, and other examples
Marketplace and Aggregator business models differ.
Amazon and Fiverr link merchants and customers and take a 10-20% revenue split.
Uber and Airbnb-style aggregator Join these businesses and provide their products.
5. The pay-as-you-go concept of business
This is a consumption-based pricing system. Cloud companies use it.
Example: Amazon Web Service and Google Cloud Platform (GCP) (AWS)
AWS, an Amazon subsidiary, offers over 200 pay-as-you-go cloud services.
“In short, the more you use the more you pay”
When it's difficult to divide clients into pricing levels, pay-as-you is employed.
6. The business model known as fee-for-service (FFS)
FFS charges fixed and variable fees for each successful payment.
For instance, PayU, Paypal, and Stripe
Stripe charges 2.9% + 30 per payment.
These firms offer a payment gateway to take consumer payments and deposit them to a business account.
Fintech business model
7. EdTech business strategy
In edtech, you generate money by selling material or teaching as a service.
edtech business models
Freemium When course content is free but certification isn't, e.g. Coursera
FREE TRIAL SkillShare offers free trials followed by monthly or annual subscriptions.
Self-serving marketplace approach where you pick what to learn.
Ad-revenue model The company makes money by showing adverts to its huge user base.
Lock-in business strategy
Lock in prevents customers from switching to a competitor's brand or offering.
It uses switching costs or effort to transmit (soft lock-in), improved brand experience, or incentives.
Apple, SAP, and other examples
Apple offers an iPhone and then locks you in with extra hardware (Watch, Airpod) and platform services (Apple Store, Apple Music, cloud, etc.).
9. Business Model for API Licensing
APIs let third-party apps communicate with your service.
Uber and Airbnb use Google Maps APIs for app navigation.
Examples are Google Map APIs (Map), Sendgrid (Email), and Twilio (SMS).
Business models for APIs
Free: The simplest API-driven business model that enables unrestricted API access for app developers. Google Translate and Facebook are two examples.
Developer Pays: Under this arrangement, service providers such as AWS, Twilio, Github, Stripe, and others must be paid by application developers.
The developer receives payment: These are the compensated content producers or developers who distribute the APIs utilizing their work. For example, Amazon affiliate programs
10. Open-source enterprise
Open-source software can be inspected, modified, and improved by anybody.
For instance, use Firefox, Java, or Android.
Google paid Mozilla $435,702 million to be their primary search engine in 2018.
Open-source software profits in six ways.
Paid assistance The Project Manager can charge for customization because he is quite knowledgeable about the codebase.
A full database solution is available as a Software as a Service (MongoDB Atlas), but there is a fee for the monitoring tool.
Open-core design R studio is a better GUI substitute for open-source applications.
sponsors of GitHub Sponsorships benefit the developers in full.
demands for paid features Earn Money By Developing Open Source Add-Ons for Current Products
Open-source business model
11. The business model for data
If the software or algorithm collects client data to improve or monetize the system.
Open AI GPT3 gets smarter with use.
Foursquare allows users to exchange check-in locations.
Later, they compiled large datasets to enable retailers like Starbucks launch new outlets.
12. Business Model Using Blockchain
Blockchain is a distributed ledger technology that allows firms to deploy smart contracts without a central authority.
Examples include Alchemy, Solana, and Ethereum.
Business models using blockchain
Economy of tokens or utility When a business uses a token business model, it issues some kind of token as one of the ways to compensate token holders or miners. For instance, Solana and Ethereum
Bitcoin Cash P2P Business Model Peer-to-peer (P2P) blockchain technology permits direct communication between end users. as in IPFS
Enterprise Blockchain as a Service (Baas) BaaS focuses on offering ecosystem services similar to those offered by Amazon (AWS) and Microsoft (Azure) in the web 3 sector. Example: Ethereum Blockchain as a Service with Bitcoin (EBaaS).
Blockchain-Based Aggregators With AWS for blockchain, you can use that service by making an API call to your preferred blockchain. As an illustration, Alchemy offers nodes for many blockchains.
13. The free-enterprise model
In the freeterprise business model, free professional accounts are led into the funnel by the free product and later become B2B/enterprise accounts.
For instance, Slack and Zoom
Freeterprise companies flourish through collaboration.
Start with a free professional account to build an enterprise.
14. Business plan for razor blades
It's employed in hardware where one piece is sold at a loss and profits are made through refills or add-ons.
Gillet razor & blades, coffee machine & beans, HP printer & cartridge, etc.
Sony sells the Playstation console at a loss but makes up for it by selling games and charging for online services.
Advantages of the Razor-Razorblade Method
lowers the risk a customer will try a product. enables buyers to test the goods and services without having to pay a high initial investment.
The product's ongoing revenue stream has the potential to generate sales that much outweigh the original investments.
Razor blade business model
15. The business model of direct-to-consumer (D2C)
In D2C, the company sells directly to the end consumer through its website using a third-party logistic partner.
Examples include GymShark and Kylie Cosmetics.
D2C brands can only expand via websites, marketplaces (Amazon, eBay), etc.
D2C benefits
Lower reliance on middlemen = greater profitability
You now have access to more precise demographic and geographic customer data.
Additional space for product testing
Increased customisation throughout your entire product line-Inventory Less
16. Business model: White Label vs. Private Label
Private label/White label products are made by a contract or third-party manufacturer.
Most amazon electronics are made in china and white-labeled.
Amazon supplements and electronics.
Contract manufacturers handle everything after brands select product quantities on design labels.
17. The franchise model
The franchisee uses the franchisor's trademark, branding, and business strategy (company).
For instance, KFC, Domino's, etc.
Subway, Domino, Burger King, etc. use this business strategy.
Many people pick a franchise because opening a restaurant is risky.
18. Ad-based business model
Social media and search engine giants exploit search and interest data to deliver adverts.
Google, Meta, TikTok, and Snapchat are some examples.
Users don't pay for the service or product given, e.g. Google users don't pay for searches.
In exchange, they collected data and hyper-personalized adverts to maximize revenue.
19. Business plan for octopuses
Each business unit functions separately but is connected to the main body.
Instance: Oyo
OYO is Asia's Airbnb, operating hotels, co-working, co-living, and vacation houses.
20, Transactional business model, number
Sales to customers produce revenue.
E-commerce sites and online purchases employ SSL.
Goli is an ex-GymShark.
21. The peer-to-peer (P2P) business model
In P2P, two people buy and sell goods and services without a third party or platform.
Consider OLX.
22. P2P lending as a manner of operation
In P2P lending, one private individual (P2P Lender) lends/invests or borrows money from another (P2P Borrower).
Instance: Kabbage
Social lending lets people lend and borrow money directly from each other without an intermediary financial institution.
23. A business model for brokers
Brokerages charge a commission or fee for their services.
Examples include eBay, Coinbase, and Robinhood.
Brokerage businesses are common in Real estate, finance, and online and operate on this model.
Buy/sell similar models Examples include financial brokers, insurance brokers, and others who match purchase and sell transactions and charge a commission.
These brokers charge an advertiser a fee based on the date, place, size, or type of an advertisement. This is known as the classified-advertiser model. For instance, Craiglist
24. Drop shipping as an industry
Dropshipping allows stores to sell things without holding physical inventories.
When a customer orders, use a third-party supplier and logistic partners.
Retailer product portfolio and customer experience Fulfiller The consumer places the order.
Dropshipping advantages
Less money is needed (Low overhead-No Inventory or warehousing)
Simple to start (costs under $100)
flexible work environment
New product testing is simpler
25. Business Model for Space as a Service
It's centered on a shared economy that lets millennials live or work in communal areas without ownership or lease.
Consider WeWork and Airbnb.
WeWork helps businesses with real estate, legal compliance, maintenance, and repair.
26. The business model for third-party logistics (3PL)
In 3PL, a business outsources product delivery, warehousing, and fulfillment to an external logistics company.
Examples include Ship Bob, Amazon Fulfillment, and more.
3PL partners warehouse, fulfill, and return inbound and outbound items for a charge.
Inbound logistics involves bringing products from suppliers to your warehouse.
Outbound logistics refers to a company's production line, warehouse, and customer.
27. The last-mile delivery paradigm as a commercial strategy
Last-mile delivery is the collection of supply chain actions that reach the end client.
Examples include Rappi, Gojek, and Postmates.
Last-mile is tied to on-demand and has a nighttime peak.
28. The use of affiliate marketing
Affiliate marketing involves promoting other companies' products and charging commissions.
Examples include Hubspot, Amazon, and Skillshare.
Your favorite youtube channel probably uses these short amazon links to get 5% of sales.
Affiliate marketing's benefits
In exchange for a success fee or commission, it enables numerous independent marketers to promote on its behalf.
Ensure system transparency by giving the influencers a specific tracking link and an online dashboard to view their profits.
Learn about the newest bargains and have access to promotional materials.
29. The business model for virtual goods
This is an in-app purchase for an intangible product.
Examples include PubG, Roblox, Candy Crush, etc.
Consumables are like gaming cash that runs out. Non-consumable products provide a permanent advantage without repeated purchases.
30. Business Models for Cloud Kitchens
Ghost, Dark, Black Box, etc.
Delivery-only restaurant.
These restaurants don't provide dine-in, only delivery.
For instance, NextBite and Faasos
31. Crowdsourcing as a Business Model
Crowdsourcing = Using the crowd as a platform's source.
In crowdsourcing, you get support from people around the world without hiring them.
Crowdsourcing sites
Open-Source Software gives access to the software's source code so that developers can edit or enhance it. Examples include Firefox browsers and Linux operating systems.
Crowdfunding The oculus headgear would be an example of crowdfunding in essence, with no expectations.
Nick
3 years ago
This Is How Much Quora Paid Me For 23 Million Content Views
You’ll be surprised; I sure was
Blogging and writing online as a side income has now been around for a significant amount of time. Nowadays, it is a continuously rising moneymaker for prospective writers, with several writing platforms existing online. At the top of the list are Medium, Vocal Media, Newsbreak, and the biggest one of them, Quora, with 300 million active users.
Quora, unlike Medium, is a question-and-answer format platform. On Medium you are permitted to write what you want, while on Quora, you answer questions on topics that you have expertise about. Quora, like Medium, now compensates its authors for the answers they provide in comparison to the previous, in which you had to be admitted to the partner program and were paid to ask questions.
Quora just recently went live with this new partner program, Quora Plus, and the way it works is that it is a subscription for $5 a month which provides you access to metered/monetized stories, in turn compensating the writers for part of that subscription for their answers.
I too on Quora have found a lot of success on the platform, gaining 23 Million Content Views, and 300,000 followers for my space, which is kind of the Quora equivalent of a Medium article. The way in which I was able to do this was entirely thanks to a hack that I uncovered to the Quora algorithm.
In this article, I plan on discussing how much money I received from 23 million content views on Quora, and I bet you’ll be shocked; I know I was.
A Brief Explanation of How I Got 23 Million Views and How You Can Do It Too
On Quora, everything in terms of obtaining views is about finding the proper question, which I only understood quite late into the game. I published my first response in 2019 but never actually wrote on Quora until the summer of 2020, and about a month into posting consistently I found out how to find the perfect question. Here’s how:
The Process
Go to your Home Page and start scrolling… While browsing, check for the following things…
Answers from people you follow or your followers.
Advertisements
These two things are the two things you want to ignore, you don’t want to answer those questions or look at the ads. You should now be left with a couple of recommended answers. To discover which recommended answer is the best to answer as well, look at these three important aspects.
Date of the answer: Was it in the past few days, preferably 2–3 days, even better, past 24 hours?
Views: Are they in the ten thousands or hundred thousands?
Upvotes: Are they in the hundreds or thousands?
Now, choose an answer to a question which you think you could answer as well that satisfies the requirements above. Once you click on it, as all answers on Quora works, it will redirect you to the page for that question, in which you will have to select once again if you should answer the question.
Amount of answers: How many responses are there to the given question? This tells you how much competition you have. My rule is beyond 25 answers, you shouldn’t answer, but you can change it anyway you’d like.
Answerers: Who did the answering for the question? If the question includes a bunch of renowned, extremely well-known people on Quora, there’s a good possibility your essay is going to get drowned out.
Views: Check for a constant quantity of high views on each answer for the question; this is what will guarantee that your answer gets a lot of views!
The Income Reveal! How Much I Made From 23 Million Content Views
DRUM ROLL, PLEASE!
8.97 USD. Yes, not even ten dollars, not even nine. Just eight dollars and ninety-seven cents.
Possible Reasons for My Low Earnings
Quora Plus and the answering partner program are newer than my Quora views.
Few people use Quora+, therefore revenues are low.
I haven't been writing much on Quora, so I'm only making money from old answers and a handful since Quora Plus launched.
Quora + pays poorly...
Should You Try Quora and Quora For Money?
My answer depends on your needs. I never got invited to Quora's question partner program due to my late start, but other writers have made hundreds. Due to Quora's new and competitive answering partner program, you may not make much money.
If you want a fun writing community, try Quora. Quora was fun when I only made money from my space. Quora +'s paywalls and new contributors eager to make money have made the platform less fun for me.
This article is a summary to save you time. You can read my full, more detailed article, here.
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Liam Vaughan
3 years ago
Investors can bet big on almost anything on a new prediction market.
Kalshi allows five-figure bets on the Grammys, the next Covid wave, and future SEC commissioners. Worst-case scenario
On Election Day 2020, two young entrepreneurs received a call from the CFTC chairman. Luana Lopes Lara and Tarek Mansour spent 18 months trying to start a new type of financial exchange. Instead of betting on stock prices or commodity futures, people could trade instruments tied to real-world events, such as legislation, the weather, or the Oscar winner.
Heath Tarbert, a Trump appointee, shouted "Congratulations." "You're competing with 1840s-era markets. I'm sure you'll become a powerhouse too."
Companies had tried to introduce similar event markets in the US for years, but Tarbert's agency, the CFTC, said no, arguing they were gambling and prone to cheating. Now the agency has reversed course, approving two 24-year-olds who will have first-mover advantage in what could become a huge new asset class. Kalshi Inc. raised $30 million from venture capitalists within weeks of Tarbert's call, his representative says. Mansour, 26, believes this will be bigger than crypto.
Anyone who's read The Wisdom of Crowds knows prediction markets' potential. Well-designed markets can help draw out knowledge from disparate groups, and research shows that when money is at stake, people make better predictions. Lopes Lara calls it a "bullshit tax." That's why Google, Microsoft, and even the US Department of Defense use prediction markets internally to guide decisions, and why university-linked political betting sites like PredictIt sometimes outperform polls.
Regulators feared Wall Street-scale trading would encourage investors to manipulate reality. If the stakes are high enough, traders could pressure congressional staffers to stall a bill or bet on whether Kanye West's new album will drop this week. When Lopes Lara and Mansour pitched the CFTC, senior regulators raised these issues. Politically appointed commissioners overruled their concerns, and one later joined Kalshi's board.
Will Kanye’s new album come out next week? Yes or no?
Kalshi's victory was due more to lobbying and legal wrangling than to Silicon Valley-style innovation. Lopes Lara and Mansour didn't invent anything; they changed a well-established concept's governance. The result could usher in a new era of market-based enlightenment or push Wall Street's destructive tendencies into the real world.
If Kalshi's founders lacked experience to bolster their CFTC application, they had comical youth success. Lopes Lara studied ballet at the Brazilian Bolshoi before coming to the US. Mansour won France's math Olympiad. They bonded over their work ethic in an MIT computer science class.
Lopes Lara had the idea for Kalshi while interning at a New York hedge fund. When the traders around her weren't working, she noticed they were betting on the news: Would Apple hit a trillion dollars? Kylie Jenner? "It was anything," she says.
Are mortgage rates going up? Yes or no?
Mansour saw the business potential when Lopes Lara suggested it. He interned at Goldman Sachs Group Inc., helping investors prepare for the UK leaving the EU. Goldman sold clients complex stock-and-derivative combinations. As he discussed it with Lopes Lara, they agreed that investors should hedge their risk by betting on Brexit itself rather than an imperfect proxy.
Lopes Lara and Mansour hypothesized how a marketplace might work. They settled on a "event contract," a binary-outcome instrument like "Will inflation hit 5% by the end of the month?" The contract would settle at $1 (if the event happened) or zero (if it didn't), but its price would fluctuate based on market sentiment. After a good debate, a politician's election odds may rise from 50 to 55. Kalshi would charge a commission on every trade and sell data to traders, political campaigns, businesses, and others.
In October 2018, five months after graduation, the pair flew to California to compete in a hackathon for wannabe tech founders organized by the Silicon Valley incubator Y Combinator. They built a website in a day and a night and presented it to entrepreneurs the next day. Their prototype barely worked, but they won a three-month mentorship program and $150,000. Michael Seibel, managing director of Y Combinator, said of their idea, "I had to take a chance!"
Will there be another moon landing by 2025?
Seibel's skepticism was rooted in America's historical wariness of gambling. Roulette, poker, and other online casino games are largely illegal, and sports betting was only legal in a few states until May 2018. Kalshi as a risk-hedging platform rather than a bookmaker seemed like a good idea, but convincing the CFTC wouldn't be easy. In 2012, the CFTC said trading on politics had no "economic purpose" and was "contrary to the public interest."
Lopes Lara and Mansour cold-called 60 Googled lawyers during their time at Y Combinator. Everyone advised quitting. Mansour recalls the pain. Jeff Bandman, a former CFTC official, helped them navigate the agency and its characters.
When they weren’t busy trying to recruit lawyers, Lopes Lara and Mansour were meeting early-stage investors. Alfred Lin of Sequoia Capital Operations LLC backed Airbnb, DoorDash, and Uber Technologies. Lin told the founders their idea could capitalize on retail trading and challenge how the financial world manages risk. "Come back with regulatory approval," he said.
In the US, even small bets on most events were once illegal. Under the Commodity Exchange Act, the CFTC can stop exchanges from listing contracts relating to "terrorism, assassination, war" and "gaming" if they are "contrary to the public interest," which was often the case.
Will subway ridership return to normal? Yes or no?
In 1988, as academic interest in the field grew, the agency allowed the University of Iowa to set up a prediction market for research purposes, as long as it didn't make a profit or advertise and limited bets to $500. PredictIt, the biggest and best-known political betting platform in the US, also got an exemption thanks to an association with Victoria University of Wellington in New Zealand. Today, it's a sprawling marketplace with its own subculture and lingo. PredictIt users call it "Rules Cuck Panther" when they lose on a technicality. Major news outlets cite PredictIt's odds on Discord and the Star Spangled Gamblers podcast.
CFTC limits PredictIt bets to $850. To keep traders happy, PredictIt will often run multiple variations of the same question, listing separate contracts for two dozen Democratic primary candidates, for example. A trader could have more than $10,000 riding on a single outcome. Some of the site's traders are current or former campaign staffers who can answer questions like "How many tweets will Donald Trump post from Nov. 20 to 27?" and "When will Anthony Scaramucci's role as White House communications director end?"
According to PredictIt co-founder John Phillips, politicians help explain the site's accuracy. "Prediction markets work well and are accurate because they attract people with superior information," he said in a 2016 podcast. “In the financial stock market, it’s called inside information.”
Will Build Back Better pass? Yes or no?
Trading on nonpublic information is illegal outside of academia, which presented a dilemma for Lopes Lara and Mansour. Kalshi's forecasts needed to be accurate. Kalshi must eliminate insider trading as a regulated entity. Lopes Lara and Mansour wanted to build a high-stakes PredictIt without the anarchy or blurred legal lines—a "New York Stock Exchange for Events." First, they had to convince regulators event trading was safe.
When Lopes Lara and Mansour approached the CFTC in the spring of 2019, some officials in the Division of Market Oversight were skeptical, according to interviews with people involved in the process. For all Kalshi's talk of revolutionizing finance, this was just a turbocharged version of something that had been rejected before.
The DMO couldn't see the big picture. The staff review was supposed to ensure Kalshi could complete a checklist, "23 Core Principles of a Designated Contract Market," which included keeping good records and having enough money. The five commissioners decide. With Trump as president, three of them were ideologically pro-market.
Lopes Lara, Mansour, and their lawyer Bandman, an ex-CFTC official, answered the DMO's questions while lobbying the commissioners on Zoom about the potential of event markets to mitigate risks and make better decisions. Before each meeting, they would write a script and memorize it word for word.
Will student debt be forgiven? Yes or no?
Several prediction markets that hadn't sought regulatory approval bolstered Kalshi's case. Polymarket let customers bet hundreds of thousands of dollars anonymously using cryptocurrencies, making it hard to track. Augur, which facilitates private wagers between parties using blockchain, couldn't regulate bets and hadn't stopped users from betting on assassinations. Kalshi, by comparison, argued it was doing everything right. (The CFTC fined Polymarket $1.4 million for operating an unlicensed exchange in January 2022. Polymarket says it's now compliant and excited to pioneer smart contract-based financial solutions with regulators.
Kalshi was approved unanimously despite some DMO members' concerns about event contracts' riskiness. "Once they check all the boxes, they're in," says a CFTC insider.
Three months after CFTC approval, Kalshi announced funding from Sequoia, Charles Schwab, and Henry Kravis. Sequoia's Lin, who joined the board, said Tarek, Luana, and team created a new way to invest and engage with the world.
The CFTC hadn't asked what markets the exchange planned to run since. After approval, Lopes Lara and Mansour had the momentum. Kalshi's March list of 30 proposed contracts caused chaos at the DMO. The division handles exchanges that create two or three new markets a year. Kalshi’s business model called for new ones practically every day.
Uncontroversial proposals included weather and GDP questions. Others, on the initial list and later, were concerning. DMO officials feared Covid-19 contracts amounted to gambling on human suffering, which is why war and terrorism markets are banned. (Similar logic doomed ex-admiral John Poindexter's Policy Analysis Market, a Bush-era plan to uncover intelligence by having security analysts bet on Middle East events.) Regulators didn't see how predicting the Grammy winners was different from betting on the Patriots to win the Super Bowl. Who, other than John Legend, would need to hedge the best R&B album winner?
Event contracts raised new questions for the DMO's product review team. Regulators could block gaming contracts that weren't in the public interest under the Commodity Exchange Act, but no one had defined gaming. It was unclear whether the CFTC had a right or an obligation to consider whether a contract was in the public interest. How was it to determine public interest? Another person familiar with the CFTC review says, "It was a mess." The agency didn't comment.
CFTC staff feared some event contracts could be cheated. Kalshi wanted to run a bee-endangerment market. The DMO pushed back, saying it saw two problems symptomatic of the asset class: traders could press government officials for information, and officials could delay adding the insects to the list to cash in.
The idea that traders might manipulate prediction markets wasn't paranoid. In 2013, academics David Rothschild and Rajiv Sethi found that an unidentified party lost $7 million buying Mitt Romney contracts on Intrade, a now-defunct, unlicensed Irish platform, in the runup to the 2012 election. The authors speculated that the trader, whom they dubbed the “Romney Whale,” may have been looking to boost morale and keep donations coming in.
Kalshi said manipulation and insider trading are risks for any market. It built a surveillance system and said it would hire a team to monitor it. "People trade on events all the time—they just use options and other instruments. This brings everything into the open, Mansour says. Kalshi didn't include election contracts, a red line for CFTC Democrats.
Lopes Lara and Mansour were ready to launch kalshi.com that summer, but the DMO blocked them. Product reviewers were frustrated by spending half their time on an exchange that represented a tiny portion of the derivatives market. Lopes Lara and Mansour pressed politically appointed commissioners during the impasse.
Tarbert, the chairman, had moved on, but Kalshi found a new supporter in Republican Brian Quintenz, a crypto-loving former hedge fund manager. He was unmoved by the DMO's concerns, arguing that speculation on Kalshi's proposed events was desirable and the agency had no legal standing to prevent it. He supported a failed bid to allow NFL futures earlier this year. Others on the commission were cautious but supportive. Given the law's ambiguity, they worried they'd be on shaky ground if Kalshi sued if they blocked a contract. Without a permanent chairman, the agency lacked leadership.
To block a contract, DMO staff needed a majority of commissioners' support, which they didn't have in all but a few cases. "We didn't have the votes," a reviewer says, paraphrasing Hamilton. By the second half of 2021, new contract requests were arriving almost daily at the DMO, and the demoralized and overrun division eventually accepted defeat and stopped fighting back. By the end of the year, three senior DMO officials had left the agency, making it easier for Kalshi to list its contracts unimpeded.
Today, Kalshi is growing. 32 employees work in a SoHo office with big windows and exposed brick. Quintenz, who left the CFTC 10 months after Kalshi was approved, is on its board. He joined because he was interested in the market's hedging and risk management opportunities.
Mid-May, the company's website had 75 markets, such as "Will Q4 GDP be negative?" Will NASA land on the moon by 2025? The exchange recently reached 2 million weekly contracts, a jump from where it started but still a small number compared to other futures exchanges. Early adopters are PredictIt and Polymarket fans. Bets on the site are currently capped at $25,000, but Kalshi hopes to increase that to $100,000 and beyond.
With the regulatory drawbridge down, Lopes Lara and Mansour must move quickly. Chicago's CME Group Inc. plans to offer index-linked event contracts. Kalshi will release a smartphone app to attract customers. After that, it hopes to partner with a big brokerage. Sequoia is a major investor in Robinhood Markets Inc. Robinhood users could have access to Kalshi so that after buying GameStop Corp. shares, they'd be prompted to bet on the Oscars or the next Fed commissioner.
Some, like Illinois Democrat Sean Casten, accuse Robinhood and its competitors of gamifying trading to encourage addiction, but Kalshi doesn't seem worried. Mansour says Kalshi's customers can't bet more than they've deposited, making debt difficult. Eventually, he may introduce leveraged bets.
Tension over event contracts recalls another CFTC episode. Brooksley Born proposed regulating the financial derivatives market in 1994. Alan Greenspan and others in the government opposed her, saying it would stifle innovation and push capital overseas. Unrestrained, derivatives grew into a trillion-dollar industry until 2008, when they sparked the financial crisis.
Today, with a midterm election looming, it seems reasonable to ask whether Kalshi plans to get involved. Elections have historically been the biggest draw in prediction markets, with 125 million shares traded on PredictIt for 2020. “We can’t discuss specifics,” Mansour says. “All I can say is, you know, we’re always working on expanding the universe of things that people can trade on.”
Any election contracts would need CFTC approval, which may be difficult with three Democratic commissioners. A Republican president would change the equation.
Jonathan Vanian
3 years ago
What is Terra? Your guide to the hot cryptocurrency
With cryptocurrencies like Bitcoin, Ether, and Dogecoin gyrating in value over the past few months, many people are looking at so-called stablecoins like Terra to invest in because of their more predictable prices.
Terraform Labs, which oversees the Terra cryptocurrency project, has benefited from its rising popularity. The company said recently that investors like Arrington Capital, Lightspeed Venture Partners, and Pantera Capital have pledged $150 million to help it incubate various crypto projects that are connected to Terra.
Terraform Labs and its partners have built apps that operate on the company’s blockchain technology that helps keep a permanent and shared record of the firm’s crypto-related financial transactions.
Here’s what you need to know about Terra and the company behind it.
What is Terra?
Terra is a blockchain project developed by Terraform Labs that powers the startup’s cryptocurrencies and financial apps. These cryptocurrencies include the Terra U.S. Dollar, or UST, that is pegged to the U.S. dollar through an algorithm.
Terra is a stablecoin that is intended to reduce the volatility endemic to cryptocurrencies like Bitcoin. Some stablecoins, like Tether, are pegged to more conventional currencies, like the U.S. dollar, through cash and cash equivalents as opposed to an algorithm and associated reserve token.
To mint new UST tokens, a percentage of another digital token and reserve asset, Luna, is “burned.” If the demand for UST rises with more people using the currency, more Luna will be automatically burned and diverted to a community pool. That balancing act is supposed to help stabilize the price, to a degree.
“Luna directly benefits from the economic growth of the Terra economy, and it suffers from contractions of the Terra coin,” Terraform Labs CEO Do Kwon said.
Each time someone buys something—like an ice cream—using UST, that transaction generates a fee, similar to a credit card transaction. That fee is then distributed to people who own Luna tokens, similar to a stock dividend.
Who leads Terra?
The South Korean firm Terraform Labs was founded in 2018 by Daniel Shin and Kwon, who is now the company’s CEO. Kwon is a 29-year-old former Microsoft employee; Shin now heads the Chai online payment service, a Terra partner. Kwon said many Koreans have used the Chai service to buy goods like movie tickets using Terra cryptocurrency.
Terraform Labs does not make money from transactions using its crypto and instead relies on outside funding to operate, Kwon said. It has raised $57 million in funding from investors like HashKey Digital Asset Group, Divergence Digital Currency Fund, and Huobi Capital, according to deal-tracking service PitchBook. The amount raised is in addition to the latest $150 million funding commitment announced on July 16.
What are Terra’s plans?
Terraform Labs plans to use Terra’s blockchain and its associated cryptocurrencies—including one pegged to the Korean won—to create a digital financial system independent of major banks and fintech-app makers. So far, its main source of growth has been in Korea, where people have bought goods at stores, like coffee, using the Chai payment app that’s built on Terra’s blockchain. Kwon said the company’s associated Mirror trading app is experiencing growth in China and Thailand.
Meanwhile, Kwon said Terraform Labs would use its latest $150 million in funding to invest in groups that build financial apps on Terra’s blockchain. He likened the scouting and investing in other groups as akin to a “Y Combinator demo day type of situation,” a reference to the popular startup pitch event organized by early-stage investor Y Combinator.
The combination of all these Terra-specific financial apps shows that Terraform Labs is “almost creating a kind of bank,” said Ryan Watkins, a senior research analyst at cryptocurrency consultancy Messari.
In addition to cryptocurrencies, Terraform Labs has a number of other projects including the Anchor app, a high-yield savings account for holders of the group’s digital coins. Meanwhile, people can use the firm’s associated Mirror app to create synthetic financial assets that mimic more conventional ones, like “tokenized” representations of corporate stocks. These synthetic assets are supposed to be helpful to people like “a small retail trader in Thailand” who can more easily buy shares and “get some exposure to the upside” of stocks that they otherwise wouldn’t have been able to obtain, Kwon said. But some critics have said the U.S. Securities and Exchange Commission may eventually crack down on synthetic stocks, which are currently unregulated.
What do critics say?
Terra still has a long way to go to catch up to bigger cryptocurrency projects like Ethereum.
Most financial transactions involving Terra-related cryptocurrencies have originated in Korea, where its founders are based. Although Terra is becoming more popular in Korea thanks to rising interest in its partner Chai, it’s too early to say whether Terra-related currencies will gain traction in other countries.
Terra’s blockchain runs on a “limited number of nodes,” said Messari’s Watkins, referring to the computers that help keep the system running. That helps reduce latency that may otherwise slow processing of financial transactions, he said.
But the tradeoff is that Terra is less “decentralized” than other blockchain platforms like Ethereum, which is powered by thousands of interconnected computing nodes worldwide. That could make Terra less appealing to some blockchain purists.
Bart Krawczyk
2 years ago
Understanding several Value Proposition kinds will help you create better goods.
Fixing problems isn't enough.
Numerous articles and how-to guides on value propositions focus on fixing consumer concerns.
Contrary to popular opinion, addressing customer pain rarely suffices. Win your market category too.
Core Value Statement
Value proposition usually means a product's main value.
Its how your product solves client problems. The product's core.
Answering these questions creates a relevant core value proposition:
What tasks is your customer trying to complete? (Jobs for clients)
How much discomfort do they feel while they perform this? (pains)
What would they like to see improved or changed? (gains)
After that, you create products and services that alleviate those pains and give value to clients.
Value Proposition by Category
Your product belongs to a market category and must follow its regulations, regardless of its value proposition.
Creating a new market category is challenging. Fitting into customers' product perceptions is usually better than trying to change them.
New product users simplify market categories. Products are labeled.
Your product will likely be associated with a collection of products people already use.
Example: IT experts will use your communication and management app.
If your target clients think it's an advanced mail software, they'll compare it to others and expect things like:
comprehensive calendar
spam detectors
adequate storage space
list of contacts
etc.
If your target users view your product as a task management app, things change. You can survive without a contact list, but not status management.
Find out what your customers compare your product to and if it fits your value offer. If so, adapt your product plan to dominate this market. If not, try different value propositions and messaging to put the product in the right context.
Finished Value Proposition
A comprehensive value proposition is when your solution addresses user problems and wins its market category.
Addressing simply the primary value proposition may produce a valuable and original product, but it may struggle to cross the chasm into the mainstream market. Meeting expectations is easier than changing views.
Without a unique value proposition, you will drown in the red sea of competition.
To conclude:
Find out who your target consumer is and what their demands and problems are.
To meet these needs, develop and test a primary value proposition.
Speak with your most devoted customers. Recognize the alternatives they use to compare you against and the market segment they place you in.
Recognize the requirements and expectations of the market category.
To meet or surpass category standards, modify your goods.
Great products solve client problems and win their category.