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Exit to Community

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Exit to Community

A model for building businesses for (and with) the community

Thomas Klaffke
Mar 23, 2022
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Exit to Community

www.creativedestruction.club
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In my first newsletter issue “From Corporation to Self-Actualization”, I talked about community economies and DAOs as a new operating system for such communities. This was one article excerpt that I highlighted:

And then, last week, this happened:

Twitter avatar for @yugalabs
Yuga Labs @yugalabs
We’re excited to announce we’re adopting ApeCoin as the primary token for the Bored Ape Yacht Club ecosystem as well as future Yuga products and services.
Twitter avatar for @apecoin
ApeCoin @apecoin
Introducing ApeCoin ($APE), a token for culture, gaming, and commerce used to empower a decentralized community building at the forefront of web3. 🧵
9:08 PM ∙ Mar 16, 2022
2,273Likes536Retweets

If you aren’t up to date on what’s happening in crypto or the NFT space and have no idea what this means, then let me quickly explain:

The Bored Ape Yacht Club (BAYC) is one of the most successful NFT projects and communities in the crypto world. It was only created about a year ago by a startup (i.e. a few friends) called Yuga Labs. Each NFT corresponds to a cartoon ape customized with unique color schemes, facial expressions, and outfits. Yes, you heard that right. Here is one, for example (don’t right click and save, please 😂):

Bored Ape Yacht Club NFT Purchased by Sports Betting Giant for $375,000 |  Newswire

First, this was “only” about profile picture art using this interesting new NFT crypto technology. But then it became much more: A community and a brand! Suddenly, more and more people wanted to join and be part of it. The value of each ape NFT went up and up. Then, a roadmap for the project was born. And even celebrities (Justin Bieber, Eminem, Shaquille O'Neal, Gwyneth Paltrow, Snoop Dogg, Jimmy Fallon… just to name a few) and global brands didn’t wanna miss out anymore, acquiring ape NFTs or partnering with the Bored Ape Yacht Club (BAYC).

Eminem spent close to half a million dollars on a Bored Ape Yacht Club NFT  that looks like him. - Luxurylaunches

During their launch last year in April, one ape NFT only cost 0.08 ETH (around $200). If you want to buy one right now, it starts at more than 100 ETH (around $290,000!!!) for the cheapest. The top-selling ape of all time, Ape #8817 raked in $3,408,000 at a Sotheby’s Metaverse auction in October 2021. And Yuga Labs is since yesterday valued at over $4 billion. 🤯

All of that growth in value has been caused by a combination of community, earliness or momentum, exclusivity, and status. Today, the Bored Apes are a well-run community club that offers an increasing array of perks:

  • First and foremost, Members have commercial usage rights to their apes. Meaning they can and are making and selling prints, T-shirts, coffee mugs, and other products using the IP of the BAYC NFT they own.

  • Then there is also merch exclusive to BAYC owners

  • New BAYC NFT projects (e.g. the Bored Ape Kennel Club) that BAYC owners get exclusive access to

  • Exclusive events and parties. Your Bored Ape is your ticket.

  • A game is being developed

  • A metaverse was recently teased

  • And lastly, BAYC members have a say in where the project’s funds go – and so far community initiatives have donated millions to various charities.

Are these perks justifying buying a digital ape NFT for $290,000? ….🤷‍♂️
Is the BAYC art beautiful? ….🤷‍♂️
Does BAYC create any societal value? Or in other words, does the world need BAYC and what is it solving? ….🤷‍♂️

In its essence, BAYC creates a sense of belonging, making people feel part of some bigger cultural phenomenon:

“[…] BAYC and its creators at Yuga Labs are culturally relevant in a way no other NFT project can touch. Following the Bored Apes is like getting a whirlwind tour through the entire NFT-verse. Over here, a band full of NFTs is debuting a terrible song called "WAGMI!" Over there, the BAYC is raising millions for Ukraine! There's Bored Ape weed and Bored Ape apparel and Bored Ape trading cards and on and on it goes…..The point is, Bored Apes aren't just an art project; they're a genuine cultural phenomenon.” - via protocol

And then also just recently, Yuga Labs, the creators of BAYC, announced that they acquired CryptoPunks (the #1 NFT project, period) and Meebits (another super popular one). This means that Yuga Labs now controls three of the most valuable NFT collections (or communities) in existence. And as they did with BAYC, they are now giving full commercial rights to all individual NFT holders of CryptoPunks and Meebits. This will enable these holders to create artwork and products based on their NFTs the same way BAYC owners have, further building out their massive community and brand.

Okay and now, let us go back to what kicked this off:

Twitter avatar for @yugalabs
Yuga Labs @yugalabs
We’re excited to announce we’re adopting ApeCoin as the primary token for the Bored Ape Yacht Club ecosystem as well as future Yuga products and services.
Twitter avatar for @apecoin
ApeCoin @apecoin
Introducing ApeCoin ($APE), a token for culture, gaming, and commerce used to empower a decentralized community building at the forefront of web3. 🧵
9:08 PM ∙ Mar 16, 2022
2,273Likes536Retweets

ApeCoin? Yep exactly, $APE a token was released and airdropped to all BAYC owners, for free… And some owners, like this guy, made over 70k from it:

Twitter avatar for @NathanHeadPhoto
🏝nathanhead.eth🏝 @NathanHeadPhoto
My BAYC + BAKC airdrop amount rn, I honestly don't know what to do this is a lot of money 🥺
Image
12:54 PM ∙ Mar 17, 2022
1,270Likes68Retweets

Ahaaa….And who operates ApeCoin?

Twitter avatar for @apecoin
ApeCoin @apecoin
ApeCoin is owned and operated by the ApeCoin DAO, a decentralized organization where each token holder gets to vote on governance and use of the Ecosystem Fund. Holding ApeCoin is the only requirement for membership in the ApeCoin DAO.
9:02 PM ∙ Mar 16, 2022
1,829Likes154Retweets

Ahaaaaaaa….. a DAO in which every token holder is a member.

Ladies and Gentlemen, a community economy is born! 🙃

Why is this so interesting?

Well, what BAYC or Yuga Labs did here is basically an Exit to Community. It’s a way of giving back to early backers, to those who believed in BAYC back a year ago, when they were small and their future was uncertain. Web3 enables “Exit to Community” with these so-called airdrops (amongst other things), which is why they have become quite popular lately in the space.

See, what startups usually do is quite different:

“When a startup company takes early investment, typically the expectation is that everyone is working toward one of two “exit” events:

  • selling the company to a bigger company

  • or selling to retail investors in an initial public offering (IPO).

In either case, the startup is a hot potato. One group of investors buys in order to sell to another group of investors who buy in to sell to the fools down the road. There’s something sort of pyramid-scheme-ish about all this. The exit event, also, is often the beginning of the end of any positive social vision that the company might have held.” - Nathan Schneider

In addition to this, this model is also keeping wealth concentrated in the hands of people who are already in positions of structural power (investors, CEOs, etc.).

However,….

“in Exit to Community (E2C), the company would transition from investor ownership to ownership by the people who rely on it most. Those people might be users, workers, customers, participant organizations, or a combination of such stakeholder groups.”

And the mechanism used for co-ownership doesn’t have to be digital apes, DAOs and ApeCoins. It can also be a cooperative, a trust, a non-profit or something else entirely. (Although, I do have to say that crypto is offering an amazing toolset for this.)

This also doesn’t mean that the entire company exits to community. The community can own the whole company when the process is over, or it can just own a substantial-enough part of it (as in the case of BAYC). And founders should also see enough of a reward, of course, that they feel their risk and hard work was worth it. The same goes for investors.

Exit to Community also provides a good answer to the question and problem of running businesses without an expiry date. Not everything has to last forever:

“In fact, when things persist beyond their utility, they perpetuate the challenges that they are designed to solve. What does a graceful transition to the next phase of a project or an institution look like? Exit to Community can be one of the answers.” - Nina Berman

And lastly, E2C also offers a potential way to reorient organizations or companies that are embroiled in a conflict between leadership, staff, and the community that they serve. Giving ownership to the community could be a powerful and super helpful way to solve these conflicts and any misaligned values or even product-fit. 

The BAYC example is of course quite controversial. Actually, the entire crypto space is controversial 😂. But think of it more as a new, interesting world that offers some completely new ways of doing things - for example, building businesses and brands.

🧐 Imagine: What if Patagonia suddenly exited its business (or parts of it) to everyone who ever bought a Patagonia shirt or outdoor gear, to all of its employees and partner organizations, or even to nature?

As I explored in my previous issue, the problem we have is that we lack new ideas and models that are based on sustainable growth and shared power. But…

“…Exit to Community provides one alternative path for growth, longevity, and success for new organizations or startups. It gives us a way of thinking about structures that encourage growth and ambition, while still being designed to benefit the community.” - Nina Berman


Alright, that’s it for this week!

If you enjoyed this please help me get the word out and share my newsletter or this issue with your network, colleagues and friends!!! 🙏 In my first issue, I teased that there will be a surprise for my first 100 subscribers. I can tell you now that Exit to Community definitely has something to do with it. 😉

See you next week,

Thomas

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