IMPACT: a Social Startup Framework
The world is getting ever more complex, with over 8.1 billion people, many connected via real-time communication network and devices. The collective ideas and actions of 8+ billion thinking brains can create very complex and dynamic interactions!
Today we also face challenges never encountered before: climate, polarization of people, natural disasters, even wars to name a few, and at scales not seen before. These all require novel solution and teamwork.
Startups and entrepreneurship has always been at the heart of society progress, especially with many of today’s exponential technologies.
Futurist Peter Diamandis even predicted that the next 3-person unicorn is around the corner.
However, while talents exist everywhere, startup opportunities aren’t. Not everyone is fortune enough to be given the “birth lottery “ as Warren Buffett said, to be near Silicon Valley or the likes.
We do believe that with remote work becoming the more accepted and access to capital is facilitated by cryptos and blockchain, more internationalized startup teams will formed around the global to solve global challenges.
One key question remind: how will these people work together, given diverse background, incentives, commitments, even countries of origin?
We have developed a framework with the purpose to rapidly start sustainable and impactful startups and businesses. The idea is that if a ready framework exists that is well understood by many, startups can bootstrap quicker and make more positive impact.
Our ideal outcome is that global businesses can start quickly yet remain purposeful throughout its lifetime. While breaking barriers of geographies and nationalities.
Without an effective and well-accepted framework, purposeful people can waste valuable time trying to find ways to collaborate, yet not effective due to the mis-alignment between purpose and methods.
We’ve named this framework the “Investor/Management/Professional Aligned Collaboration Token” (IMPACT) Framework, to reflect its purpose and nature. Below we’ll explain the basics of IMPACT:
There are 3 main roles and contributions for any startup effort:
- investor: contributes money (capital)
- management: contributes idea (vision/networks)
- professional: contribute time (knowhow/expertise)
In traditional companies, the investor and management are often the same, who provide capital and hold company shares, and the professionals are often “employees” that get paid via cash salary.
In more modern tech startups, “employees” are also given shares or options, to boost incentives and long-term alignment. However, how much shares should be allocated for such purpose can be rather difficult and confusing to design.
Fundamentally, “shares” actually is a token for both “power” (voting rights) and “profit” (dividend sharing). While “salary” is a token to exchange for other real-world stuff (fiat currency such as US dollars is a widely used token to exchange goods/services with the other members in the society).
In the purely “owner/management-stock” “employee-salary” model, people with stock shares have long-term interests for the company, while salary employees may not.
Another issue is that “investors” typically have more power (by having more financial contribution) over the “founders” who have the vision, and may direct the start/project direction not aligned with the original vision.
We observe that as blockchain becomes more pervasive, it’s actually an affordable token mechanism that can combine the power of “shares” and “salary/bonus” into a single vehicle while having flexibility not seen with traditional mechanism.
So what is “Blockchain”?
While many explanation exists, for our purpose here, we see it as an easy way to create tokens by almost anyone, anywhere, to “tokenize” some asset, something valuable.
A simple way to understand is that “companies” actually do not exist physically but rather as a concept, materialized and represented by the “shares” of the company.
A share in a company represents a voting and profit-sharing right, and makes the company more tangible and “real”.
Similarly, “blockchain” can allow the issuing of “tokens” that can also represent things of value, such as a piece of land, a house, a painting, some gold, even intangible assets such as a person’s attention, time, reputation.
Use of blockchain is already commonly seen in some circles, especially in the crypto-invest/speculation world. However, 99% of world’s population probably still hadn’t gotten hand on even a single crypto, so we’re still in very early stages.
What we’d like to do is to leverage blockchain’s transparency, accountability, security, and global nature, to allow people to join forces and work as teams, while having a clear way to incentify for their contribution and efforts.
One key design is to de-couple “power” from “profit-sharing”, so different tokens can actually represent different degree of “power” and “profit”, and between “shares” and “salary”.
Below we’ll bullet list some key designs for IMPACT:
- 3 types of tokens: investor tokens (I-tokens); management tokens (M-tokens); professional tokens (P-tokens)
- issurance: each token is acquired by contribution of money/idea/time. I-tokens and P-tokens can be created as new money (capital or profit) is contributed, M-tokens are fixed in quantity from start to limit control.
- funds: Respective fund pools are set up for investor/management/professional, so that respective tokens are redeemable any time with the underlying assets. However, only the “professional” pool is fully 1-to-1 backed by stable coins, while the “investor” and “management” pool are initially empty, and filled with future profit from the project’s operations.
- decision: daily/operational ones are made by management, or if consensus cannot be reached, via 2/3 majority vote.
- governance: for major decisions that have wider impact, such as how much profit to release to pools, membership to management, etc., all roles can contribute based on the voting power of each roles’ tokens.
- circulation: I-tokens and P-tokens can be listed on public exchange and switch hands (possibly earning a premium), while M-tokens can only be exchanged privately to keep control/decisions within the team/project.
- accountability: based on predefined agreement/rules, if certain conditions are not met (for example, missing 1/3 attendance during meeting), then the team member forfeits the right to get future tokens.
Case 1: traditional company structure
3 founders each contribute US $10,000 for company capital, and get equal shares each. Professional get paid by salary only.
Power:
investor/management-1 (33.33%)
investor/management-2 (33.33%)
investor/management-3 (33.33%)
professional (0%)
Profit:
investor/management-1 (33.33%)
investor/management-2 (33.33%)
investor/management-3 (33.33%)
professional (0%)
Salary:
management: paid by cash based on hourly/monthly rate
professional: paid by cash based on hourly/monthly rate
Case 2: tech startup structure
1 investor contributes $10,000 initial capital for 50% of shares, 1 technical founder got 40% tech shares. 10% shares are used for employee bonus.
Power:
investor (50%)
management (40%)
professional (10%)
Profit:
investor (50%)
management (40%)
professional (10%)
Salary:
management: paid by cash based on hourly/monthly rate
professional: paid by cash based on hourly/monthly rate
Case 3: IMPACT-leveraged structure
Investor puts in $1,000,000 for 30% voting rights and 60% profit sharing rights.
Management put in $100,000 for 60% voting rights and 30% profit sharing rights.
Professional get paid by P-tokens, which can be exchanged to stable coins immediately or be kept to wait for its value to increase, as profits may be added to the underlying stable coin pool.
Power:
investor (30%)
management (60%)
professional (10%)
Profit:
investor (60%)
management (30%)
professional (10%)
Salary:
management: paid by P-tokens based on hourly/monthly rate
professional: paid by P-tokens based on hourly/monthly rate
Conclusion
By separating the representation of “power” and “profit” in traditional company shares, the IMPACT framework allows three types of distinct tokens be issued and represented rights of various degrees that are designable and tailored to each team’s specific needs.
By understanding this framework, investors, management, and professional can quickly come together and decide on how they would like their unique commitment and contributions be compensated differently and to what degree, based on the nature of each project.
Our hope is that such as flexible framework, if adopted widely, could boost another wave of global startup entrepreneurship that may produce 1,000 “social unicorns” in within the next 20 years that could contribute significantly to positive social goods!
If you’re interested to explore further and adopt IMPACT to your next project, feel free to reach out on my LinkedIn as we’re recruiting initial teams to experiment with our new platform!
references:
* world population:
https://www.worldometers.info/world-population/
