There’s a lot of hype in tech. But despite what press releases and TED Talks like to tell us, most tech companies will not disrupt the industry — much less the world — into an unrecognizable new form.
Dan Novaes, on the other hand, might be the guy who actually changes everything.
Dan’s company Current Media aims to upend how media consumption is monetized. In short, Current takes ad dollars and passes some of the value on to consumers, as an incentive to keep using the platform.
On Current’s app, users do things that they already do on the internet — right now, the company is primarily focused on streaming music — and are rewarded with in-app points called CRNT, where 1,000 CRNT points equal $1. Points can be redeemed for gift cards, cash, and various products, including hardware like headphones.
All of this is backed by Current Media’s own cryptocurrency, CRNC. As more users and advertisers start using the Current platform, the idea is that CRNC will gain in value. Eventually consumers will begin exchanging points for CRNC, while advertisers and content partners will start paying Current in CRNC, theoretically creating a sustainable ecosystem in the notoriously temperamental media industry.
In 2018, three years after launching, Current Media put 35 percent of their one billion total CRNC tokens up for grabs in an initial coin offering (ICO), and raised $36 million so fast that they canceled the planned public sale. But their legal headaches were only just beginning.
Dan came on the podcast to discuss what it takes to create a new cryptocurrency while staying on the good side of the Securities and Exchange Commission (SEC), and what he learned in one crazy year.
A new business model
Scott: What did you see in the media space that made you think, we can create something that’s completely different?
Dan: We wanted to think about how can we maximize earnings and provide value to the users, while also creating value for ourselves. Media businesses today, like Facebook and the social media companies, I think that they are about to see a tremendous amount of change in what their business will be as we go into 2020 and beyond.
Users are waking up to the fact that if a product is free, it means that you are the product. The whole idea behind Current was, can we create a better model that incentivizes the user to do something they’re already doing each day? We’re specifically focusing on music today. Independent of what country you’re from, what language you speak, people listen to music. Can we monetize in a different way than traditional music platforms — which generally lose money?
We take microtasks — things that we can monetize — and then allow people to earn money while they listen and do other activities, like fill out a short questionnaire or engage with an offer, to get cash back to our merchant partners. We pay the users a couple hundred bucks a year, so that provides them with something that they are going to pay for anyway or that they’re already doing anyway, but also provides them value. And it also provides our partners value and provides our platform value.
Scott: In the model that everyone knows, on Facebook, you are the product. In the Current model, we’re going to get your data, get your info, but I’m actually going to give you [the user] money.
Dan: And if you don’t want to exchange, you don’t have to.
The way that our underlying model works now is that as people consume content on Current, they don’t actually see the whole crypto side of it, because most people aren’t necessarily ready for that. They understand it exists, but crypto is still pretty confusing for the average user. So as they earn and then redeem for gift cards or whatever, we take a portion of every redemption and then buy our crypto off the market.
We’re always reducing supply, so you can essentially then have a sustainable platform that rewards people, but you have the underlying model of the coin where that value is created because you’re essentially taking fiat and buying it off the market. It’s kind of like a stock buyback.
Scott: Let’s get into how the cryptocurrency raise went down: tell me how that went and how that contributes to your business model.
Dan: It has its drawbacks but it’s been enlightening, I suppose! This concept of cryptocurrency was something that I had personally been invested in — Bitcoin and other cryptocurrencies. But it was a hobby, I never thought that I would start some endeavor in the crypto space.
Then two or three years ago, we stumbled upon this idea of rewarding people for attention and data. And then we were like, we can take one of two paths. We can either go and raise traditional venture capital and go down that process that we’d been through before. We had raised equity rounds before. Or we could do this as a cryptocurrency release and reward people in that, for listening on our service. We ultimately chose the latter. We were seeing what was happening in the space and everyone was excited about it. That was when you started seeing it on the news, and you started seeing Bitcoins at maybe $5,000 at the time.
When we started the whole process of doing the token sale, we didn’t really know what to expect, because it was such a crazy space. When we completed it, within one month we had raised this massive quantity of money. The media had caught on and all these different groups had found out about it on the internet. And then we had to close it because we had too much interest in the sale.
We had to cancel our public sale, because simultaneously while this was all happening, the SEC announces god knows what, and maybe all these things are illegal. You’re in this middle ground. As an entrepreneur, I’ve done several different businesses, and that’s definitely always been my approach. You know, we’re still a startup, this isn’t that big a deal. But then we started talking to lawyers — it was hard to find lawyers that knew what was going on. But it actually worked in our favor, I guess, when we decided to close the sale, because then the FOMO kicked in. So we ultimately had nine figures in interest for a smaller sale.
After the sale we were like, let’s make sure that we’re in good legal standing. Ultimately we had to do a repurchase on the entire offering. We went through this whole process for four months with our lawyers to clean everything up. We had to offer everyone a refund and they had an opportunity to take that or stay in the deal. We had a small percentage of people that took it. And then we filed with the SEC. Upon doing that, the SEC became aware of our round, and then we went through a whole process with them as well.
Ultimately we were very thankful that we actually had followed the procedures because very few companies in the United States have. Our company is one of, I don’t know, less than a dozen. It was this whole process that was very costly, but it was a blessing in disguise.
The crazy world of crypto backing
Dan: We had 10 to 12 people, and you’re dealing with the SEC, and you’re dealing with the CFTC [Commodity Futures Trading Commission], and you’re also trying to figure out how to create product-market fit, which already is difficult. You’re already bound to fail, like 97 percent of startups. So you have to do all of that, plus all of this regulatory stuff, plus maintain sentiment for the underlying investors, who are like, why are they taking so long to launch this coin? And then figure out an economic model that allows your business to thrive, the users to prevail, and the underlying investors in the coin to also have value creation, and you have to do all of those at the same time.
It’s very difficult to do, and do successfully. I think that that’s why a lot of crypto companies aren’t doing it as well. Is it possible? Sure. But it’s a very difficult thing. It’s crazy.
I turned 30 in December, and 2018 for me was a year where I felt that I gained 10 years of wisdom compared to the previous nine, where I just felt like I became a different type of entrepreneur and really understood things in a different way.