There is a number of benefits to work with YBS Capital beyond Ben Shimon’s expertise on the E2C approach.
For a typical startup, the financial life cycle usually involves entrepreneurs starting with little to no funding, pitching ideas to investors for an initial injection of seed capital, and building from there. Assuming the company is a success with its user base, it may go through several more funding rounds. Ultimately, in a standard exit strategy, the founders will reduce or liquidate their stake for a profit by selling it to investors or undergoing an IPO.
Of course, blockchain has introduced some revolutionary new concepts in funding. The ICO boom of 2017 brought a wave of innovation, but unfortunately, the hype was unsustainable. However, since then, and particularly over 2020, we’ve seen more projects move to a decentralized governance model. Thanks to the emergence of DeFi and the equitable token distribution models of platforms, including Yearn Finance and Uniswap, a new era of community governance and ownership appears to be just beginning. It’s exciting for anyone who’s been around over the last few years to think about what this could mean for the future of the cryptocurrency space.
YBS Capital – Pioneering the Exit to Community Model
Yonatan Ben Shimon, founder of YBS Capital, is an Israeli entrepreneur and crypto native, having been around in the blockchain sector since 2013. He’s had a keen eye on these unfolding events in the areas of funding and decentralized governance, but he believes there is even broader potential for adopting this kind of model.
He explains:
“There is a vast amount of untapped social capital that exists in the world. If we consider platforms such as Twitter or Instagram, users invest a significant amount of time on engaging with content, but they receive no financial reward for that time.”
He elaborates how these platforms depend on their “superusers” – influencers who create content and drive engagement, in turn creating value for the platform. However, all of that value goes straight back into shareholder’s pockets. Ben Shimon points to Patreon-style models as going some way towards redressing the balance. Still, he believes that community-based business models, such as exit to the community, or E2C, could do more to help return value to creators.
Exit to the community is an exit strategy where entrepreneurs distribute value to users and stakeholders rather than to investors and shareholders. The rationale behind the strategy is that the community around any given project is in a strong position to help drive further value by spreading the word to their acquaintances, offering their time on engagement, or coming up with user-generated ideas for improvement.
Ben Shimon makes a compelling case that projects adopting this strategy are setting themselves up with a better longer-term chance of success. Based on the appetite for DeFi governance tokens that we’ve seen this year, he could be on to a winning formula.
Finding the Right Fit
So, beyond DeFi, what kind of projects or companies could leverage this business model? Ben Shimon believes that it could apply to a wide range of different company types, pointing to Fairmint as one example of a platform enabling projects or companies to offer “programmable equity.”
Earlier this year, he founded YBS Capital as an advisory and investment firm helping projects execute their own E2C strategy. He explains:
“My firm is looking to invest in any companies that are interested in implementing an E2C approach. We believe the model lends itself particularly well to marketplaces providing a platform for creators. The creators don’t have to be limited to social media-type content – videos, podcasters, long-form content writers, and the like. It would also work for platforms for developers or data scientists.”
There are several benefits of working with YBS Capital beyond Ben Shimon’s expertise on the E2C approach. There’s the chance to get investment into the project, along with assistance creating a token and building liquidity for it with a community of stakeholders. There’s also an opportunity to partner with other projects adopting E2C.
E2C offers some intriguing possibilities for those interested in cryptocurrency. The opportunity to own a tokenized share in projects or companies that could be valuable in the future could generate new income streams for holders, particularly if shares of revenues are on offer in the same way as company stocks pay out dividends. There could be entirely new markets dedicated to trading these shares-as-tokens, with a more equitable distribution of wealth among users.
YBS Capital will be involved with the first layer of these projects, offering community members an opportunity to participate in the earliest iterations. Therefore, it’s one company that it’s worth keeping an eye on as we move into 2020 and beyond.