SaaS Interviews with CEOs, Startups, Founders
NFT + SaaS Business Model Signs first 2 Customers, $5m Valuation
27 Nov 2021
Chapter 1: What business model is Freeverse.io using to generate revenue?
Two signed contracts, $1,000 a month, so you can call it $2,000 in MRR signed, hoping to scale in 2023. You've sold 20% of the company twice, $500,000 pre-seed at a $2 million and another million on a seed round earlier this year at a $5 million valuation. You said you're raising now. What are you guys targeting? We're targeting 10 million years in this round.
You are listening to Conversations with Nathan Latka, where I sit down and interview the top SaaS founders, like Eric Wan from Zoom.
Chapter 2: How did Freeverse.io achieve a $5 million valuation?
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Hey, folks, my guest today is Alan Evans. He's got 15 years experience in the tech industry and has a strong passion for building teams that create products to solve real problems. He was previously CEO at Share3D.io, CTO of BodyPal, and director of Barcelona World Race The Game. He's got a PhD in medical physics from the University of College London. Alan, you ready to take us to the top?
Absolutely. Yeah, let's go. All right. You're now building Freeverse.io, which is effectively this concept called living assets. NFT 2.0 is what you're calling it. What does that mean? Yeah. I think what's really interesting we've seen in 2021 is how the NFT space has exploded, right? It's heading for like 20 billion in market cap in this year, I think from a few hundred million last year.
And it's great. We're really excited to see that there's been so much of an explosion in this space. But I think a lot of the value with current generation NFTs are based on the speculation about how rare they are. And at Freeverse, when we founded the company three years ago,
So what we're really interested in is how we could generate NFTs that would actually have value based on how they are used. So how the user can actually interact with those NFTs and affect their value and therefore drive up the price. And so that they can buy and sell for something that's not just speculation. So give me your top use case right now.
Tell us, do I have a customer using you guys and it's worked exactly how you hoped it would? Yeah, so actually we're very excited. We're launching our platform to production next month with our first client, which is a small marketplace in Ibiza, the Mediterranean island of Ibiza. And we're very excited. We're signing a couple of deals. Unfortunately, I can't announce who they are.
We're signing a couple of deals, one for a huge event in February next year, and also one with some super big IP based over celebrity IP in the United States. So we're really excited about that and see how that goes. You've had three years incubating this, all pre-revenue. So that begs the question, how did you fund your personal rent, food, things like that? Yeah, so we were lucky.
So both myself and most importantly, my co-founder, Tony Mateos, had previous startup experience. And we had quite an extensive network of angels. And so we went to them. We've raised two funding rounds so far. We're in the middle of our third funding round right now. And we went to our network of angels and pitched them a great idea to really transform an industry.
And I think that's really important. When was the first round? The first round was in 2019. The second round was earlier this year. And now with the boom with NFTs, we're seeing a great interest from investors now. So we're sort of in the middle of raising our third round. you raise there? We raised half a million. So we're in Europe.
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Chapter 3: What is NFT 2.0 and how does it differ from previous versions?
And so how is the team structure? How many co-founders do you guys have? We're four co-founders. So I'm CEO, the CTO, our CTO is Tony Mateos, who's an absolute genius, 30 patents to his name, a very intelligent guy and also a very, very charismatic guy as well. And then joining us is our head of engineering, who's Alessandro. He's a real blockchain expert.
And Ferran Estalea is our chief operating officer, who's got a lot of experience in managing large teams as well. So we're quite a strong funding team. And obviously, if you believe you're building something big, yeah, you want capital to execute that vision, but you also want to be smart about ownership and dilution.
So when you thought about that 500K pre-seed back in 2019, how did you structure that in terms of cap? How much of the company did you sell? Yeah, around about 20%. So we tried to structure every single one of the rounds following the standards, you know, diluting 20%. I think it's very difficult when you are raising in a situation like that in your pre-revenue.
It's very difficult to control that level of how much you dilute because obviously you want to raise more money to give you more runway. But obviously the more you raise, you know, it's very difficult to negotiate a high valuation for the company when you're raising so much money when you don't have that revenue. So it's something we've done.
Again, for this round that we're raising right now, it's going to follow a similar structure, I think. The difference is now, really, we have a product, we have clients that are signed, we're launching, we have a roadmap, and most importantly, perhaps most luckily, we're in one of the hottest spaces in investment right now, which is the NFT space. So we're very lucky in that sense.
You said customers are signed. How many customers have signed? Yeah, we've got two clients signed up right now. One of which is this client in Ibiza, which is one of the major universities who are interested in living assets for tracking educational progress and your professional training. So one of the larger universities in the States has signed up with us. How are you charging these guys?
So we have a really interesting revenue model where we charge. It's quite simple in money sense. We charge a monthly fee based on the number of NFTs that are launched within the universe for the client and also commission the trades for each sale of those NFTs on our platform. I see. Okay. So what is the subscription fee? Average these two contracts together.
On average, what are they paying per month? It depends entirely on how many NFTs they launch. So let me give you an example, right? So if a client were to come and launch like a thousand NFTs, they would pay like a hundred euros a month. So very low initial subscription. That scales very quickly.
So if they're, you know, launching with a million NFTs and the advantage of our platform is that it's, The advantage of our living asset NFTs is that we don't want them to be valued just by how rare they are. They don't want to be these exclusive, expensive things.
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Chapter 4: What use cases are driving customer interest in living assets?
You're smiling right now because you know I'm right. And either you do it and you waste engineering time or you don't do it and your customers have a horrible time getting onboarded. And listen, let's face the facts. Your ability to give value to your customers sometimes is very dependent on their ability to get you their data. Once you have the data, everything is really smooth.
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Yeah, I'm trying to get a capture a sense of how big these first sort of contracts are. So between the two of them, how many total NFTs did they basically sign and say, yes, I want to pay for this many thousands of NFTs? So they will both be developing NFTs as they go off. So to start off with, they'll be launching a few thousand NFTs.
The provisions for the contracts we're signing now to launch next year are to launch, you know, several hundreds of thousands of NFTs. So that would be a much, much larger escalation. Alan, I know, but the two signed today, that's what I'm trying to get at. So the two signed today, though, they're starting with like two, three thousand. It sounds like four thousand NFTs, something like that.
Yeah, that's about right. Yeah. Okay, got it. So that means each of these contract values are something like $1,000 a month, $150,000 employees. I see.
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Chapter 5: How is Freeverse.io planning to scale its customer base in 2023?
But no, it's not that they're low or high. I mean, this is a big deal that you got your first two, you know, basically customer contract sign. This is a massive moment. I'm curious just to hear how you think about scaling.
So when you look at your revenue projections, do you think more revenue growth is going to come from the original trade of the NFT, the creation of the NFT, or on effectively the fees as those NFTs are traded? That's a really great question. That's a really great question. I think it's really important to separate in the NFT space that first-hand trade versus second-hand trades.
From our perspective as Freebus, we charge a commission on every trade on our marketplace, whether it's a new drop, a new mint of an NFT, or whether it's a trade in the second-hand marketplace. I think what's really interesting... What is that fee, Alan? So that's depending on the client, that usually is between 4% and 6%. Okay, got it, got it. And who's setting the initial value of the NFT?
That's the client 100%. So they decide what cost they want to sell it at. Got it. So if they decide they want to sell it at like a penny, you're getting 4% to 6% of a penny. Yeah, but they also get 95% of a penny as well. So it's in their interest to try and sell that price or maybe in their interest to give it away for free, right? To allow those users to upgrade that NFT.
So the value goes up and then you're incentivizing the secondhand trading markets. I see. I see. So what would the university use case be? Were they meant to put your NFTs last year and now it's 2023? What's the use case where an NFT is essentially swapping hands? Yeah, it's a super, super interesting use case because there is no trading.
So there is a completely different business model that we're negotiating with them, which is more based on a SaaS model, not the revenue model or revenue share model. So their idea and their vision is that the NFT should... It's non-transferable. It gets assigned to you uniquely when you sign up for a course, right, or sign up at a university.
And that over your professional career, the value of the NFT automatically degrades or the level of the NFT automatically degrades as you naturally start forgetting what you've learned. So how do you top up your learning when you go back and study or you attend online courses?
And I think addresses a really huge market there in terms of not just university in the academic domain, but also things like the professional training and the medical world and the engineering world and the legal world. And I think there is a,
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Chapter 6: What challenges does Freeverse.io face in fundraising?
A huge opportunity there that's been untapped for really proving. Imagine, for example, I have a PhD in medical physics. I did that 20 years ago. And to be honest, I haven't gone back into the field for a while. So my LinkedIn profile says I have a PhD, and yet what do I know about medical physics today in the modern world? Very little, right?
And so that should be reflected in some sort of way of tracking my knowledge in that. Had I been attending conferences and publishing papers and doing more professional training, I could have kept that level and topped up that level of my academic records. That's something I think that's a really interesting use case.
It's assuming the universities are giving you skills that are valued in the marketplace today, which I would argue is rare. More and more rare. That's an argument to debate. But also, I think it's not just universities. It's also executive education. It's professional training in various other fields, as we mentioned, medicine and engineering and the legal firm.
Doctors are actually required to carry on the professional training, and that's done in a very ad hoc way right now. I think there's an opportunity there to standardize that field. Understood. But two signed contracts, $1,000 a month, so you can call it $2,000 in MRR signed, hoping to scale in 2023.
You've sold 20% of the company twice, $500,000 pre-seed at a $2 million and another million in a seed round earlier this year at a $5 million valuation. You said you're raising now. What are you guys targeting? We're targeting 10 million years in this round. At what valuation? Again, the valuation is yet to be determined, but you can do the math, right?
So if we're targeting 10 million euros and want to dilute by 20%, then the valuation would be around about 40 million. But we're still in debate with the VCs. How does your brain wrap around that? I mean, you have $24,000 in ARR. So if you just calculate and do this pure on science and math, that would be a multiple out of $40 million. I mean, that's just an insane multiple.
So what your answer is going to be is, well, Nathan, it's a big vision, which is fine. But you're also rapidly decreasing your optionality in terms of an exit because you have to grow above that before you guys get any liquidity at the end. So how do you balance all that? Yeah, I think it's true. And I think that's a really good point. It's a really good question.
It's something we debated with ourselves, whether to raise money now or raise money later. I think ultimately it comes down to what we want to do and what the opportunity is. I do think that we have an opportunity to introduce something that's really, really groundbreaking and different in the field. Could we do that without having that capital?
It would be more difficult and it would be slower and we may not get there in time. We may be beaten there. So it's a case of like, okay, well, Do we want to shoot for the moon or do we want to play it conservatively? In this case, we're considering shooting for the moon. Nothing's signed yet, so we'll see how it goes. Yeah, we'll see. Okay, what's the team size today? How many people?
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Chapter 7: How does Freeverse.io plan to balance ownership and dilution?
I appreciate it.