WorkCoin founder Fred Krueger reinvents freelance work on the blockchain
A veteran founder explains the lessons he’s learned on his path to ICO
Freelancing is booming and DNA portfolio project WorkCoin is set to be an essential platfrom for changing the way people work. We sat down with founder Fred Krueger to discuss his history of successful launches, how he came up with the idea for WorkCoin, what it’s like collaborating with DNA, and lessons he’s learned along the way. Below: Full video and highlights excerpted in condensed interview format.
How did you wind up here?
A long, circuitous route. I’m a Stanford guy who went to work on Wall Street for six years as a prop trader in New York. Then, at 30-years-old, I decided to go into tech and start a software company which was actually a big hit. And we sold it to Macromedia in the mid 90’s. It was shrink-wrapped software days.Then, I moved into the internet. Started the largest game site on the internet. We had 30 million players. Eventually sold that company to Vivendi Universal. Then I got involved in ad networks, started four of them, and then got involved in social networks right around the same time Facebook was starting out. I had a company which I sold to MTV.
And I knew [DNA co-founder] Brock Pierce quite well and he got big into crypto four to five years ago, and I remember him saying, “Fred, this is what I’m doing. This is what you should do, this is it.” And I was just looking at him with like, “What are you talking about?”
In mid-2017, he had just done his ICO for Blockchain Capital, and that’s when I really was like, “Okay, something here is definitely happening.” I was less interested in the Bitcoin story than I was interested in the idea that this could be a new phase of technology.
How did you come up with the idea for WorkCoin?
I was doing this software service collaboration tool at the time and felt the need to pivot and get into the blockchain space. Brock’s advice was don’t try to tack it on to what you’re doing. And that was very good advice. Just start over. You can’t take these existing businesses and bolt blockchain onto them. It just doesn’t work.
Start over. You can’t take these existing businesses and bolt blockchain onto them. It just doesn’t work.
I rethought it. I asked “Where do I think the opportunity is?” And I think it’s putting collaboration inside of a marketplace. I look at the competitors and see one major flaw with these systems: They don’t show the identity of the person that you’re hiring. They want to own the interaction. So you’re not hiring “Fred Krueger,” you’re hiring “Fred K., USA,” you know? And “Fred K., USA,” that’s not somebody that anybody’s going to hire, you know?
I could say I’m an internet expert and they could say, “Lemme see your LinkedIn” and I can’t show them that. “What’s your last name?” Can’t tell you that. I realized then that they really captured just 5% of the market. It’s the absolute lowest-end tasks that you don’t care about who’s doing it. It’s all these freelance sites have.
It’s by design. Because they could go after the broader market, but they can’t go after it by having 20% margins. They can’t go less than 20% margins, because chargebacks, credit card fees, and buybacks on credit card fees will just eat them up. So you kind of have this catch-22: If you’re going to use credit cards to build a marketplace for services, you have to charge 15% or 20%. You have to watch for fraud like crazy. You have to hold people’s paychecks for two weeks to make sure they’re not in cahoots with some buyer. So this is a very simple problem, and there is no solution for it if you’re using credit cards.
Well, I’m only using crypto in and crypto out. Now if I do that, then presumably there are no chargebacks anymore. The marketplace has the crypto. I can hold on to that crypto until the job’s done, and then I can release it. Once I release it, you have it immediately. You don’t have to wait two weeks. I don’t have any credit card charges. I can move $1000 worth of Ether for 30 cents, depending on the day. Basically, there are no credit card fees. Now, it works like a charm.
There’s one big flaw in that though: Most Americans don’t have crypto. You hire a lawyer with crypto, the first question is “Where do I get the crypto?” I even started talking with investors and they’re like, “It’ll never work because no mainstream people are going to have crypto.”
But I realized that may not be true in a year. It’s certainly not true today everywhere. I’m in Korea right now and 40% of the people have crypto. To me, that’s where we’re heading. It’ll take a couple years to get there. But it’s actually an opportunity because my target market, instead of everybody, is people who already have crypto and want to get something done.
So now you’ve got a specific target market.
I want to target people already on crypto. Now what kind of services do people already on crypto want? These are the people who go to conferences and do ICOs. They’re the developers who know Etheruem. It’s people verifying your smart contract. It’s crypto lawyers, it’s people who can give advice, it’s people who can help market. People in social media who are good at Telegram. There are a whole set of skills around the crypto community that you don’t have on these sites. You type ‘telegram’ into Upwork and there are no results. Well, if I can target that market, it’s a much more achievable task than taking on all freelancers everywhere, converting them to crypto, and taking on Upwork.
What concerns have you heard from investors?
Some of my investors were like, “Well Fred, is that a big enough market?” And I’m like, “No, it’s a small enough market.” I said, “Look, Facebook started with Harvard.” This white pages of services for the crypto community does not exist. The minimal number of viable services is not huge to get that going. So I’m perfectly happy with having that be my target market. If I can own that market, that’s a great place to start. Once I’ve proven that and I get this community going on crypto, well I’ll have some lawyers there, maybe legal services will be my next thing. You have to think tactically, not just “I’ve got a big market.”
Some investors were like, “Well Fred, is that a big enough market?” And I’m like, “No, it’s a small enough market.”
The freelance market is a lot bigger than people realize. 40% of Americans are freelancers. It’s gonna cross 50% within nine years. When I first saw that I thought that there was a typo there, that cannot be the case. I sort of dove in and I realized permanent jobs are a thing of the past.
The gig economy.
From a macroeconomic perspective, the gig economy is the economy. Now people are like, “Oh, actually this is a big deal. The market you’re doing is really big, it’s not just some crappy freelancer site.” I kind of worked out the problem with Upwork. I got that and I identified the go-to-market strategy, and now I have all the elements. I have a big market, how we’re gonna solve it with crypto, what’s our go-to-market strategy, and now I can actually tell a story of how we’re gonna hit this thing. In a reasonable amount of time, not, like, two years from now. This year.
The gig economy is the economy.
How did you get involved with DNA?
I went to DNA when I didn’t even have my final legal structure in place. I’d been showing this, but zero interest. Like, “Okay Fred, sure you did a bunch of stuff, but good luck with your Upwork-for-crypto-type thing.”
Then I pitched it to DNA and everybody was like, “This is the best pitch we’ve ever heard.” It was like black to white overnight. They got it. And not one person, but everybody in the room got it. So that was the beginning and I realized this ICO business is so new and there are so many of these ICO’s out there, that it’s all about signaling. If DNA signals this is the right deal, people will look at it. Doesn’t mean they’ll invest, but people will look.
You gotta get the crypto people to buy in. There’s this whole community of sort of OG crypto people. They’re gonna look at your deal, and if that deal doesn’t fly by their standards, you’re dead. Nobody will invest in you. They’ve seen a lot. They’ve invested. They’ve invested in something and it’s gone up a hundred times, fifty times, whatever. They’ve got these battle scars. They’re pattern-matching like everybody else. They know which app people have made 300x on and which one is trading way below its ICO price.
I think the things that really work in ICOs, in my opinion, are things that are a new form of money. Payment is the killer app right now. Take Bitcoin. Why is Bitcoin so great? It’s great if you’re in China and you want to get some money out of China, and your daughter is moving to the U.S. and you want to give her $50,000 or $100,000 or $200,000 and you don’t want to deal with export controls. Give her some Bitcoin, it’ll solve the problem. If you’re a bank and you want to move money cheaper and faster than Swift, Ripple’s a pretty good solution. If you’re building an app and you’re raising money in an ICO, you’re gonna need to use Ether. Those are all payment things. To me, the things that really work are payment. But the thing that everybody’s missed is paying people for work could actually be even bigger than all those things. The money is there, right? The gig economy is a trillion dollars worldwide. Right now, Bitcoin doesn’t work for that.
How has DNA helped you with the process?
The problem with these ICOs is you’re compressing this enormous amount of activity to 3–4 months so you have to make these quick decisions. You’re super short on time. Is this investor a good investor or should I not go after this guy?Should I be spending money on this conference?
The problem with ICOs is you’re compressing this enormous amount of activity to 3–4 months so you have to make these quick decisions.
These ICOs are either gonna fail or they’re gonna succeed in six months from when they start. That’s not a lot of time. And really, if in the first 90 days, it’s not working, it’s probably not gonna work. You kind of have to come out of the gate strong, and I think you need all the expertise you can get. I am thrilled that I’ve got three super sharp people from DNA on my team. Super responsive. Literally, I can ping ’em any time, day or night. “I’m considering this. What do you think?”
Any examples?
I barely knew what Telegram was six months ago. I joined it and I thought okay, I’m not the guy where all of my friends are on Telegram. Then I’m like: I’ve got to get more people into Telegram. How do I do it? “Okay, Fred, there’s this way, this way, this way.” Okay so that’s useful. Now I can sort of narrow it down. “You can do airdrops with this person, this person, or this person.” “Or you can hire this person, this person, or this person to kind of build it up over months, etc.” That’s the kind of example where, you look at me now, I’ve got 3,500 people in Telegram. It was done pretty quickly. That’s just one thing. Telegram: Checked, done.
Journalists too. “You need to talk to these three people.” I have another firm doing my PR, which is very connected with DNA. These kind of things, you just have so many of these kind of decision points. At the end of the day, you just want to stack the deck in your favor.
What advice would you give to others in your position?
Working with DNA is worth it. If you can pull off your ICO and get it done in four months and raise $10 million or $20 million, you’d be crazy not to. You want the best guys on the planet on your side. They are the best. It’s sort of like saying, “I just got into Harvard, but I’m not sure if the tuition’s worth it.” You want to pay the tuition!
Working with DNA is worth it. You’d be crazy not to. You want the best guys on the planet on your side. They are the best.
As you move forward with the ICO process, what are you most worried about?
Well, I’ve never done an ICO, so I think one of the things that I’m a little bit in the dark on is anything connected with public sale. Should I even do a public sale? Getting into exchanges. Making sure my token doesn’t go to zero on day one of the release.
I think people look at this thing and go, “I raised the money, great.” But no, you also have employees, people around you, the ecosystem that’s contingent on your tokens doing well. That’s sort of the beginning. That means that your thing has to trade. You have to have broad participation in that.
I was originally thinking no public sale, now I’m sort of thinking a public sale’s not a bad idea. I mean, no Americans, fine. But if I have 10,000 Koreans, ponying up 500 bucks each, that’s 10,000 people that are now stakeholders, you know what I mean? They will tell people. I like this thing, I’m in this thing. I kind of think that that’s an important thing, is to get a bunch of stakeholders in this thing. Those are some of the things I’m trying to process in my brain. How do I get the maximum, not just press, but how do I get the maximum buy-in, post-ICO?
Any other advice you would give to people considering an ICO?
I see a lot of people on the fence. They’re trying to get as much information without committing. I think that doesn’t work. There’s a point where you just kind of have to go for it.
Once you start really going for it, it may fail. I see a lot of people with one toe in the water. It’s like nobody wants to talk to people who have one toe in the water. I’m not interested if you haven’t committed that you’re going to do this thing. You haven’t raised the money to at least get the thing going to some extent. You have no lawyer, then I have no interest in talking to you, because you’re not committed. You’re going, “Oh, well there may be legal risks.” “I may not succeed.” “I don’t know.” You can’t.
Nobody wants to talk to people who have one toe in the water. I’m not interested if you haven’t committed that you’re going to do this thing.
Nobody wants to talk to people who have one toe in the water. I’m not interested if you haven’t committed that you’re going to do this thing.
This is a binary thing, either you’re in or you’re out. You just don’t want to be dealing with people who are one toe in. I have a lot of time for people who are in the process. I share notes with other ICOs a lot. On Facebook I’m sharing notes to people in the community to what’s happening in Korea. I think there’s a lot of “I give you my information, you give me your information.”
You‘ve been quick to achieve a minimal viable product. How important has that been for you in this process?
Having a minimal viable product is going to be required going forward. I just don’t think you can do it any more the other way. There’s too much noise.
I saw one recently, I won’t say what it is. It was just a bunch of made-up screenshots and timelines that go into 2019. I was looking at it going, nobody’s going to believe this at this point. Maybe a year ago when the stuff was new, there were little ideas happening. Those are just plans. I think at this point in time, nobody’s going to buy it.
I don’t think you have much of an option. The bar’s been ratcheted up because people are starting to develop more fleshed out products, more fleshed out ideas. I think it’s critical. Even my product, this week we’re changing some of the user interface. People were like, yeah, I want to see that new interface. I think the bar is going higher, higher, higher. It’s not going to be minimal viable, it’s viable product.
I want to play with your app. That’s one other piece of advice I’d say: Look at mobile. Do not disregard mobile. If you’re a normal entrepreneur and you’re building some kind of service, and your service doesn’t run on iOS and Android, no investor will take you seriously. For some reason, because blockchain is so new, people are showing these web-only things and they expect that this is gonna fly. I say it will not fly. In 2018, you’re going to have to have a mobile solution to your thing. People in the blockchain world just haven’t thought this thing out enough. How is that mobile app gonna interact with the blockchain?
It’s not any harder than anything else. People are like “Where do you get your blockchain engineers?” I said they’re called engineers. There’s not a blockchain engineer species. You need to think about mobile. I would say that’s more important than performance, almost. People are like, “I’ve got so many transactions per second.” I’m like, “But you have no iPhone.” That’s a problem.
Those would be my two pieces of advices. Think about mobile and just jump in. Worst case, you fail. And you learn a lot along the way. Maybe you reiterate and find a different idea and you go again. The people who seem to be going all in seem to be getting their ICOs done. The people who are not all in are the ones I see hanging out at the conferences wondering why nobody’s giving them money. Well, because you’re not in the game.
Those would be my two pieces of advices. Think about mobile and just jump in.
Interview conducted, condensed and edited by DNA.
