Each year Y Combinator (YC) accepts two batches of startup for its famous startup incubation program. The one for Winter 2020 just closed, and our startup Joint Commonwealth Fund (JCF), the 0% entry fee crypto index fund that aims to make basic income universal, also applied.
For the interest of record-keeping and also sharing with the community of what JCF is really like (where it has been, where it’s going, etc.), we’re posting our application (blocking out private details). Hope you’ll enjoy!
Joint Commonwealth Inc.
Company url, if any:
If you have a demo, what’s the url? For non-software, demo can be a video. (Please don’t password protect it; just use an obscure url.)
Describe your company in 50 characters or less.
the crypto index fund that makes basic income universal
What is your company going to make?
We’re building a crypto index fund called Joint Commonwealth Fund (or JCF) that invests in the top 10 cryptos (by market cap), and automatically re-distribute the profit via smart contract to provide passive income for participants (both individuals or organizations). The purpose is to provide financial protection (i.e., universal basic income, UBI-like) for a community of people, bootstrapping grassroot-UBI from the private sector.
We achieve our “social goal” this way: ALL profits (increase in the fund’s net asset value, or NAV) go into a “dividend pool”, where 1/4 of the pool is paid monthly as dividends to fund participants. 50% of which is “common” (by ratio of JCF tokens held), and the other 50% is “shared” (equally distributed among all KYC-verified token holders). To support ourselves and our cause, a 10% “profit tax” is taken off all the dividends paid. Of which, 7% is “donation tokens” that a token holder MUST send/donate to a relative, friend, or organization. The other 3% is for JCF’s operations and marketing. There’s 0% entry fee, 0% annual fee, and 2% exit fee, to encourage long-term holding.
There will be two types of participants in JCF: those joined via investment and those joined via gift/donation. Both will receive passive income continuously as long as they participate. We would like JCF to become a global passive income vehicle riding on the crypto trend, with very low entry barrier so it can benefit those who need it the most. The minimal investment is USD 10, and you can gift part (7%) of the dividends earned to any person/organization you’d like to support.
Where do you live now, and where would the company be based after YC? (List as City A, Country A / City B, Country B.)
Taichung, Taiwan / Toronto, Canada
Email address of the founder who is filling out this application:
Please provide the email addresses of the other cofounders in the startup. No need to add yours again. Founders must have at least 10% equity in the company. We will send an email to each founder to fill out additional information about themselves.
Please enter the url of a 1 minute unlisted (not private) YouTube or Youku video introducing the founder(s). (Follow the Video Guidelines.)
Please tell us about an interesting project, preferably outside of class or work, that two or more of you created together. Include urls if possible.
Michael and I were co-workers in my first company, Imonology, which is an agile software development house that could prototype systems in 1–2 weeks time with daily client deliverables.
One of the projects we did was for a school to build a student management system, and we utilized a custom node.js framework built by our company called Flexform to auto-generate forms capable of basic DB CRUD operations with low to little coding involved. It’s a bit internal though we have felt that it’ll likely be useful for other people who might need to build internal IT systems quickly. See: https://www.npmjs.com/package/scalra-flexform
How long have the founders known one another and how did you meet? Have any of the founders not met in person?
Michael and Shun-Yun know each other since Aug. 2011, at the first “Startup Weekend Taipei” event (see photos here: https://get.google.com/albumarchive/100193287359429998595/album/AF1QipN-s74Bzl4ZKwJddcdRgWd_YskJjSdER6I2FL2-)
Our team of 14 (mostly engineers, with half of them working on their own startup already, including the founder of POP, a UI prototyping app that went to Silicon Valley, and FindTaxi, which later became the largest taxi app in Taiwan) built a HTML-based chat widget that could be used on any website. Michael was then an Android developer and Shun-Yun just started his first company Imonology building the first game.
After the event it was mostly casual chat occasionally, and even some weekend hiking in Taipei together while Shun-Yun still lived there until 2012. In 2016 Michael moved back to his hometown in Taichung, and contacted Shun-Yun as he was interested to learn how to meditate and Shun-Yun has been learning Buddhism for a while. We’ve since been having various exchanges in the shared interest of a person’s spiritual developments.
Near the end of 2017 when the crypto market was booming, Shun-Yun started to take note of the trend and did a serious study, he convinced Michael that it was a tech trend well worth the effort to devote the next few years to decades on, and Michael agreed to be on board to both Imonology as a project manager (PM) and JCF as a co-founder in Apr. 2018.
How many founders are on the team?
Which category best applies to your company?
Crypto / Blockchain
How far along are you?
JCF started in Jan. 2018, we’ve got whitepaper, official website, service was launched late Oct. 2018. We’re now performing monthly index fund rebalancing on the top 10 cryptos. The fund size started with about USD 10,000 and has grown to 4% ~ 5% monthly on average (85% annualized return). We’ve been doing content marketing with weekly FB/YouTube videos as a reach to reach potential customers. Some of our key milestones are below:
2018.01 Project Start
2018.04 Alpha launched
2018.05 whitepaper first draft
2018.07 company registered in Taiwan
2018.10 JCF launched
2018.11 exhibited as “alpha startup” in WebSummit’18 (Lisbon)
2019.03 5-crypto rebalancing (monthly)
2019.05 exhibited as “alpha startup” in Collison’19 (Toronto)
2019.06 10-crypto rebalancing (monthly)
2019.07 redesigned for 0% fee structure
2019.08 smart contract revised for 0% fee design
2019.09 (expected) 1st dividend payment
2019.10 (expected) will offer public service offering
2019.11 (expected) will attend as “alpha startup” at WebSummit’19 (Lisbon)
How long have each of you been working on this? How much of that has been full-time? Please explain.
Shun-Yun started the original concept in a blogpost in Dec. 2017:
Prototyping began with help from Shun-Yun’s 1st company Imonology in Jan. 2018. 2nd Co-founder Michael joined on-board in April. 2018 and it had been a 70–80% time effort until JCF’s launch in late Oct. 2018. But we do still need to attend to Imonology’s client works as sources of personal income.
As both of us need other income sources for the time-being, we spend about 10–20% of our time on JCF now as it’s undergoing a revision from a 2% fee to 0% fee design.
Are people using your product?
How many active users or customers do you have? If you have some particularly valuable customers, who are they? If you’re building hardware, how many units have you shipped?
About 14 accounts so far mostly from friends & family.
Do you have revenue?
Anything else you would like us to know regarding your revenue or growth rate?
We’ve tried to market JCF to various types of potential customers/audience, mostly from the non-crypto / non-technical background (our target audience), and got the feedback that it’s difficult to understand, also the fees structure was too high (upon first investment, 2% manage fee, and 10% team/donation tokens off, which we model after Crypto20). Although having “team tokens” was common in the crypto world, it’s a strange and unfamiliar concept for those outside.
We’ve since changed the design from 2% entry, 0.1% annual fee, 0% exit fee (which is already quite low compared to other similar crypto funds), to 0% entry, 0% annual, and 2% exit fee structure. Also there won’t be any “team/donation tokens” taken off upon investment, but rather they’re applied only after the investor receives profits in the form of dividends (so a 3% performance fee in essence).
We expect the change in design will be more friendly and understandable to the general public and will help in traction.
If you’ve applied previously with the same idea, how much progress have you made since the last time you applied? Anything change?
Yes. There are three main progresses:
- JCF’s design has changed to a 0% entry fee, 0% manage fee (from 2% entry, 0.1% manage). The smart contract is being upgraded & tested now. We expect to complete by end of Sept. 2019. This makes the whole fund easily to understand and also more aligned with participant’s interests.
- We’re now performing 10 crypto (up from 5 crypto) re-balancing on a monthly basis regularly. With good RoI results (4~5% monthly return).
- We’re in discussion with a potential investor (into the company) based in NY, U.S., it’s been a weekly call since Aug. 2019.
If you have already participated or committed to participate in an incubator, “accelerator” or “pre-accelerator” program, please tell us about it.
Why did you pick this idea to work on? Do you have domain expertise in this area? How do you know people need what you’re making?
I grew up in Taiwan but went to Cambridge, Mass in 1991 with my parents and witnessed homelessness in major U.S. cities. It was shocking as Taiwan didn’t have many homeless on the streets (ironically when I went back to Taiwan in 1996, I saw more of them). I first learned about “universal basic income” (UBI) from the book “Redesigning Distribution” a few years ago and thought that was the answer to poverty and income disparity, but considered it a government business, or none of my business until I become a billionaire. :)
However, the crypto boom in 2017 prompted first my investment interest, and after in-depth studying, I was convinced that both Bitcoin and crypto/blockchain are here to stay and will have real impact to our financial systems. I looked for a way to participate/benefit from an investment point of view, but also pondered about how we could make this trend beneficial to society at large, instead of just another tech/vehicle to make the rich become richer.
I realized that index fund investment is probably the way to go (having invested in stock market since college for close to 20 years), as it’s a provenly safe way for long-term trend investment. Also if we utilize blockchain/smart contract for redistribution, we might actually realize a vehicle for UBI that can be very automated and efficient compared to government efforts.
My main background was in software and founded my first company Imonology (an agile software development house) in 2011, so I had no finance background. But after talking with some friends with finance background I realized doing an index fund won’t be that hard given some simple rules.
I’m not sure what others will perceive of a fund like this, but what I do know is that I myself am the target audience (married with young kids, wanting to provide financial safety for my family in face of an uncertain future due to massive automation and huge wealth disparity). I also do know that the upcoming automation due to AI + robotics + blockchain will replace many existing jobs (Andrew Yang, the 2020 democratic presidential candidate has done an excellent explanation on this), so likely social issues will arise in the near future.
I will need a form of protection for my family that is long-term sustainable, and although I can see that UBI is a much needed solution, likely it’ll take governments decades before any needle is moved. However, we can do something much quicker and effective from the private sector NOW.
What’s new about what you’re making? What substitutes do people resort to because it doesn’t exist yet (or they don’t know about it)?
None of the “parts” of what we’re doing is new, we take existing blockchain tech (Ethereum ERC20 tokens), financial instruments (index fund), and a decades-old socialism concept (UBI), but blend them together to make it feasible, finally, for some form of UBI to happen from the private sector, through individuals forming a community.
JCF won’t be “unconditional” as obviously one needs to be an investor or a selected recipient of donations, however, it does have the potential to become “universal” across national borders (though not necessarily as universal as covering everyone in a country).
Currently government welfare is what’s taking care of society’s less well-to-do, and insurance products are filling out the investment/financial safety needs for people. However, both are costly and inefficient, also creating large financial institutions that may have become in some cases, too powerful, arrogant and ineffective.
Who are your competitors, and who might become competitors? Who do you fear most?
Although we’re structured as a crypto index fund, we don’t really consider other crypto funds as competitors (such as Crypto20 from Invictus Capital, which we’ve modeled after), as they’re mostly “wealth instruments”, while our goal/aim is to become a “social instrument” to bridge the wealth gap. Our competitions more likely are other passive income instruments such as traditional index fund, or real estate investments (which pay out rents). However, we do believe that crypto/blockchain investment will have better yields in the near future.
We do fear that as people aren’t as understanding or receptive or crypto investments (it’ll take time for education). So people who already accept cryptos may be attracted to the index funds offered by other larger institutions and we won’t attract their attention. However, we do feel that our main audience will be people who have yet to understand or get into crypto investments and are more familiar with traditional / existing vehicles.
What do you understand about your business that other companies in it just don’t get?
The majority of people who’ll take part in the crypto economy likely won’t be the current young kids (white male between 25–35, risk-taking and rich), they will be the people who holds the majority of the society’s wealth now (age 35–55 or above). How to attract their attention and earn their trust is the more interesting challenge.
Another aspect is that “social investments” or “social impacts” is something the older generations may not understand about the millennial, who would potentially care more and thus may be willing to take part, if they can be certain of the social impact/benefits.
How do or will you make money? How much could you make?
(We realize you can’t know precisely, but give your best estimate.)
Our business model is very simple: JCF is a 0% entry fee, 0% manage fee fund, but we do take 3% off the dividends people receive on a monthly basis, to cover our operations. The 3% currently is designated as: 1% marketing, 1% operations, 1% board/advisors.
Our initial goal is to make the fund to be “ramen-profitable”, which we estimate for USD 10M asset under management (AUM), and our current historic return at 4% monthly, we’ll be able to have roughly 10M x 4% (monthly return) x 25% (dividend payable) x 3% (team token) = USD 3k / month, which should suffice for our basic operations.
Anything beside that will be bonus (larger fund size, higher return on crypto market). Though we certainly would like to see JCF grow to trillions in size, like the first index fund Vanguard, so that our social mission can be truly fulfilled.
How will you get users? If your idea is the type that faces a chicken-and-egg problem in the sense that it won’t be attractive to users till it has a lot of users (e.g. a marketplace, a dating site, an ad network), how will you overcome that?
The current “go to market” plan is to simply attract individuals interested in crypto investment, but is afraid of the high risks involved. We expect to intro them JCF via specific online communities using funnel marketing.
The next step is to attract social organizations and NGOs to sign up onboard as recipient organizations to receive the 7% crypto donation. For this we’ll likely use “funnel marketing” via Russell Brunson’s ClickFunnel platform (that grew from 0 to 100M in revenue in 3 years).
Once we have enough “recipients”, the more and reputable the better. We’d then like to approach socially-minded wealthy individuals through specific intro channels, to attract them to participate in the fund, both for their own investment / hedging needs, but also to utilize their wealth/profit for social purposes that may potentially be difficult to achieve (such as supporting charities in 3rd world nations directly with total transparency).
“Bridging the Wealth Gap” between the rich and those in need, could be a principle marketing concept we’ll be undertaking. Also it would help both sides to solve their existing needs/problems.
Once the fund gets going and has a certain size and track record, then it will be easier for the “middle guys” to join.
Have you incorporated, or formed any legal entity (like an LLC) yet?
What kind of entity and in what state or country was the entity formed?
LLC in Taiwan.
Please describe the breakdown of the equity ownership in percentages among the founders, employees and any other stockholders. If there are multiple founders, be sure to give the equity ownership of each founder.
Shun-Yun Hu, XX.00% (CEO & co-founder, majority investor)
Michael Wang, XX.00% (COO & co-founder)
Matthew Lien, XX.00% (minority investor, co-founder at Imonology with Shun-Yun)
Have you taken any investment yet?
Please provide any other relevant information about the structure or formation of the company.
The company is setup so the voting rights are: 33% investor, 33% management, 33% operation/dev, with 1% veto right at the main founder (Shun-Yun). Investors can invest as much as they want and can earn dividend profits, but voting rights is capped at 33% max.
Are any of the founders covered by noncompetes or intellectual property agreements that overlap with your project? If so, please explain.
Who writes code, or does other technical work on your product? Was any of it done by a non-founder? Please explain.
Team members at Shun-Yun’s 1st company Imonology did all the programming work. Michael has been a project manager (PM) at Imonology and manages the dev team. There are three main engineers involved in the codebase so far.
Is there anything else we should know about your company?
(Pending lawsuits, cofounders who have left, etc.)
We work remotely since day 1. All the development work is contracted and done by Shun-Yun’s first company Imonology, though JCF owns all the IP rights. The deal is done over a debt contract with Imonology (so JCF currently has about USD XXX,000 in debt to Imonology the company).
If you had any other ideas you considered applying with, please list them. One may be something we’ve been waiting for. Often when we fund people it’s to do something they list here and not in the main application.
My first company Imonology has been building up a cloud-based dev platform called ImonCloud (https://imoncloud.com), that provides cloud-based online editor to write code and deploy to production environments. We’ve also built open source node.js framework called Scalra that facilitates the rapid development of system prototyping. With Scalra and its Flexform module, one can build a custom system fairly quickly with low to no code. Currently we can deliver system prototypes in 1–2 weeks of time with daily deliverables to clients, and we’ve been trying to turn our tools and knowhow into online courses (described in this blog: https://medium.com/@shunyunhu/how-to-apply-time-limited-extreme-agile-tea-to-deliver-software-on-time-78f0c5e25f58?source=friends_link&sk=904cf507b6ceb990248617f00752cccb)
The other is to build up a location-based service (LBS) engine that may provide spatial publish/subscribe (SPS) functions for other companies (akin to a “pubnub” for spatial apps/games) based on my previous research work in the space (see: http://vast.sf.net).
Please tell us something surprising or amusing that one of you has discovered. (The answer need not be related to your project.)
We discovered that the fund might be used as a “wealth preservation” vehicle for protection across generations. Kind of serving the purpose of a “family office” for the not so wealthy individuals or families. Some parents in the retirement age may want to provide their children financial protection without taking away the incentives or motivations for their children to work in “good” industries.
JCF thus may protect not just across current users/fund participants, but can also been seen/used as a wealth preservation vehicle (if one decides to send “donation token” to a family member or child).
Another aspect of JCF that may make it a “safer” investment tool is that by forcing all profits be moved to a “dividend pool”, an investor is actually protected against his/her own bad investment behaviors.
Most retail investors lose money because they don’t have sound strategy and/or the discipline to execute a strategy, often selling and buying at the wrong time. It’s also why most lottery ticket winners go back to the same wealth level in a couple of years, as they don’t know how to handle the extra wealth well. With JCF’s approach, profits are preserved in the “dividend pool” so a person cannot touch or misuse it for other purpose and lose it all. Profits in a way are streamed back to the investor on a regular basis, and most of the profits in the dividend pool (¾) stay there to continuously generate more wealth.
What convinced you to apply to Y Combinator? Did someone encourage you to apply?
JCF participated at Collison’19 in May 20–23, 2019 as an “alpha” startup and I attended a talk by Michael Seibel where he shared YC’s Call for Startup in the Gov 2.0 space. Part of the feedback we got at Collison was we might want to consider working with governments as a more efficient way for current welfare. JCF certainly is replacing parts of government functions by private sector effort, so we thought the theme might fit with the CFS. I also knew UBI is something YC has been interested to explore / learn about, with Sam Altman being a proponent.
Of course, JCF is intended as a global effort, and our current reach in Taiwan may not be international enough for our end-goal. YC definitely would help.
How did you hear about Y Combinator?
I have been a Hackers News reader since it started many years ago, also really admire what YC’s done. I was also a researcher for scalable peer-to-peer virtual worlds (https://vast.sf.net) before founding my first startup, and thus knew the P2P work of Robert Morris (one of YC’s co-founders) well. Paul’s writing has been inspiring and encouraging to me in my 1st startup as well.
Please tell us about the time you, shunyunhu, most successfully hacked some (non-computer) system to your advantage.
All males need to go through military service for 2 years in Taiwan, yet I wanted to become a game developer to work on things that interested me, and later found my own company. So I ended up staying at school, all the way till finishing a Ph.D. Through a friend who worked at Academia Sinica (the highest national research institute), I got a Postdoc position at his lab, where I could work instead of serving in the military, and also started my first startup Imonology.
Holding a company position (as CEO) while working for government institute is not allowed legally in Taiwan. However, I found a way out by having my startup to do a tech transfer from Academia Sinica on research work I’ve done myself, so I could legally work on the startup while being full-time employed as a postdoc at Academia Sinica.
The other time is I got dropped out from university due to poor grades in my sophomore year, as I was dating my girlfriend while holding a programming job at the Computing Center. My girlfriend (an exchange student) had to go back to her country, while I still had 2 years of military duties to serve. She was also bounded by contract to teach for 5 years before she had any freedom to move. Wanting badly to live with her, the only way possible was to pay off her student loan. I made a deal with my parents to borrow the amount, while going through the process to repeal my expel order from the university. I successfully convinced the board of professors that I had a different learning style incompatible with exam-based grading systems, and had my dropout orders removed a total of 3 times, before I was eventually admitted back to school (so I could get my master degree ASAP as promised to my parents). To my knowledge, I may be the only person (or at least the first) to have a university dropout order removed successfully in Taiwan.
Please tell us in one or two sentences about the most impressive thing other than this startup that you have built or achieved.
One of the first peer-to-peer overlay specifically built to scale virtual worlds / spatial applications to potentially billions of concurrent users (https://vast.sf.net). The research was highly cited in a niche research field called Massively Multi-user Virtual Environment (MMVE):
Do you have any other commitments between January through March 2020 inclusive?
I’ve two young kids, a daughter now in boarding school, and a son 5 years old which I might need to help my wife to care for. I’m also holding a consultant position for a media company in Taipei, though the consulting can be done remotely.
Do you have any commitments in the future and if so what?
My first company Imonology, may still need my attention 20% of the time, and it does the dev work for JCF.