EOY 2023 - A week of quiet
My writings from Christmas to the New Year as the time to reflect, refresh, consider, plan and set the BHAG without the noise.
What I love about the time between Christmas and the New Year is there is time to sit quietly, think, reflect and consider the next year without the noise. Something that I have done over the years that have gone on to create game changing products for the businesses I’ve been involved in at that time. This year, I have decided to blog about the process to be a record for myself of the work done, and also a record for others in the future as being open about what we are doing, as the Web3 world has shown transparency is a powerful tool when you are doing something outside the box.
My ramblings and thinking process - a bit long
First is thinking about the past and bringing it back to a set of simple learnings. Then it is thinking about where we are now before thinking about the next year and what it will be before stepping outside the comfort zone and setting a large hairy goal.
Step 1 is reflection by writing as a history lesson.
This review of history brings lots of memories back to the fore and adds colour to what has been worked on with this written word only capturing part of the work, but sets you up for the next stages.
The last 12 months have been a roller coaster professionally and personally. On the personal side, my wife had a full knee replacement done which should have been done sooner, but long Covid got in the way which restricted this happening, but as per normal, she has bounced back fully thank goodness. Going back to NZ to say bye to family lost over Covid (but not due to Covid) and also moved 700 kms north to Byron Bay Hinterland which has the New Zealand like green around us (we are Kiwi’s), much warmer and a much more chilled environment to Sydney.
Professionally have learned a lot, researched and tried out a number of ideas based upon the epiphany of the year before of business of the invisible bank of small business and seeing the ability to do real-time payment splitting that had come from the work from the Christmas break before that covered NFT’s, DAO and royalties payments that couldn’t happen due to a number of problems in the technology and acceptance in the market at that time.
This year was about saying lean so as not to be distracted by investor demands that have derailed me before on other projects I have done as they locked us in too soon on an idea and we would stay on that path too long. This has allowed time to try out ideas, kill them and rebuild, building on work from the year before. Then doing POC coding, interacting with people to test different opinions out and deploy the learning in many directions to see the gotchas and possibilities. This allowed the core idea to be fleshed out, refined and also working inside tight self imposed restriction as raising millions to make this happen wasn’t possible, so time to focus on working out the core using a small amount of money and limited resources which means you strip away all noise and distractions product wise. During this time, extensive reading, talking to people to also understand the legal landscape was required so we could see how we could roll this out as well, as a product can’t work without a proper robust business structure behind it.
The other side of work was fully working out a model to implement this which formed into the idea of the commercial community model that created a closed loop network built around four pillars of asset ownership, value transfer, communications and governance.
The next level of work started once we moved in late June to Byron Bay as I could now work closely with my Co-Founder (instead of via Zoom), Phil Goodwin and be at the studio business with real users as the idea had been forming into a much tighter structure and was now ready to move forward. This work was now more focused on product building to an MVP.
The idea was now formed to create a whole new working business model as the feedback of ‘can’t be done, the old way works well, why would you change’ and more had reinforced that we had something. BUT, this also showed that to bring this to market, we would have to have it working end to end, ie show ver’s tell.
August was the next inflection that opened a big change as doing detailed analysis of pass activity at the studios covering 5 years of data showed if the new way would work before building the MVP. This then opened the next big change of the idea, jumping from having to build all ourselves which was holding us back to making it work by leveraging the power of Wix and Hedera. These two big changes now changed the whole costing and opened up the opportunity to be fully workable sooner with a limited team size. This now allowed us to make it all work and actually implement it ourselves with no outside investment.
Was accepted a Hedera program with AngelHack that helped to push this through faster. The next four months was building the new https://byronbay.bodymindlfie.com site using Wix Studio, creating a Wix App to manage this, linking to the backend, then linking to the Hedera engine and then to the AirWallex bank account building on the work from before. This now has been completed as a full business implementation and is running at the Byron Bay Studio fully and ready for other studios. A quick five months with lots of new learning and gotchas which is very normal.
Step 2 is to create a summary of all the work removing the dead ends
Now taking a fresh look at the results and going over all the memories plus doing an analysis of current market activity analysis allowed a clean slate to be formed and pick the best parts out from the last few years learnings and linked to all the past experience as well to be as concise as possible.
The first part is stripping back to find the core of what has been created and what is actually means.
A trustless programmatic real-time transaction rail is the fundamental function of this and that is what everything hangs off.
This whole model affects an accounting metric called the Cash Conversion Cycle which business’s are always tweaking as impacts growth and working capital requirements while it is based upon trust of others doing what they promise. The key word is trust and in small business, promises somewhere in the are are always broken that they have no control over and this is repeated right through the chain with all depending on the trust which breaks often, so when it fails for one, it fails for many creating an instability in the chain of business.
The next part is what we need to do.
What we have learned is to get this accepted, we have to create all the wrappers around this as it is a completely new idea of how business can run as the feedback has been “show us, not tell us”. Community is the initial warper as creates a closed loop model that has clear benefits from this model. This is formed from businesses that are membership based and will benefit from a change to an inclusive model instead of the extractive model that most business are built on. This has required extra features to be added to meet the four pillars of community covering assets, transfer, communications and governance.
Next is looking at the outside influences.
Looking at the market changes and seeing the regulations coming into place aligns with the expectations learned and how the whole system must be structured with clear separation. BUT also seeing that this adds a complexity in how the whole business model is to be implemented which helps to create a barrier.
Then looking at what everyone is talking about for the next 12 months and this is the new $400B opportunity (JP Morgan and Bain report) with asset tokenisation that opens many assets to a whole new market and net type of assets adding as well. Has been building for a while and our talks with DigitalX in the last year with their implementations sets this up as part of our long term model as trusted flow of money makes this work.
And finally how do we deliver this
As we are now building an end to end model, so we need each part structured so it can be rolled out as its own as business structure as this is an important long term objective while also understanding the behavioural requirements of each as well as this impacts the hiring, investors and growth models.
The product being delivered now is built on Wix Bookings which gives access to their market power. Have added an extra layer of top of this to allow it to fully work with the model, streamlining the business activity and using Hedera to power the backend for the transfer functions. Also other functions have been added to make the whole process of running the studio smoother as well.
The process is as the students arrives to a class, as they sign in, a transaction is created based upon the set rules to split this activity to the teacher (30%), landlord (20%), operations team (15%), management (15%), marketing (5%) , services (10%) and a community account (5%).
Now that this all works and has been bought to the fore a set of clear items that anyone can see covering operational benefits, time saved, money saving, we can now build the future.
Step 3 is fleshing this back out to move forward.
This is now about considering all this information with the clear views that is now top of mind and setting the next foundation to build from.
We are now ready to grow as the core work, a working MVP and the whole idea has been locked in now with hard data behind it.
First is the business structure required to build this as this decides the how each part works.
Part 1 is the business model implementation which is to be managed by Kula Digital with a focus on the Yoga and Education market as a platform and implementing this following a classic B2B SaaS business model. This is like other businesses I have done before with SapphireOne, Leap Legal, Sparx and Rapporr over the years and fits into Phil’s background. We have an unfair advantage in this space with Phil’s 20 years of being in the industry and having three Studios operating to show as proof to others, ie leap frogging normal startup problem of no users.
This is building based upon a closed-loop model using membership based businesses as the first lead in with a community style focus to allow them to out complete their peers.
Part 2 is the OnChain work which is the programmatic payment business and will need two different entities covering on chain transfer and the other being the stable coin business and allowing this to be placed in different jurisdictions to operate under their rules. In many cases will be under the thresholds in each but should be done as though part of the thresholds so can open to new activities that will come from running this model. This is a classic backend business and has a HQ model and subsidiaries as needed to meet the rules of each location.
Part 3 is the Foundation which is all about promoting this whole model and encouraging developers to become part of this. Kula Digital will open sourced some of the technology it has created so others can build business models on top of the programmatic payment model which the Foundation will drive. This model is what many of the Blockchains have followed as it is all about building ecosystems.
Part 4 is considering where this could end up as once you have a network of programmatic users, you can then open up new activities linked to tokenized assets, cross border activities between different groups and DeFi functions as a starting point.
Next to how to get it out there
Part of the Go-To-Market model is considering impact with competitors and other users as building a new market is hard, so it is about leveraging others to kick start this. The big one is MindBody Online in teh booking space which Kula Digital is taking on directly through Wix. The key for this is leveraging Wix, the unhappy current system users and doing a complete solution that more than one pain point.
The other part is linking with Hedera as the primary chain to run this on which has shown to have the same direction as we are taking.
Next is the regulators and making the current the model being used very clear to fit under all thresholds as each community is its own entity and what we are doing is a business process and not true money transfer which also stops the banks de-banking us as they are then stopping a business operate as per normal of collecting money, splitting this and then paying its suppliers.
Final consideration is the team to make this work and that is what the next stage is all about as kept lean to get the purpose all set. With clear purpose, then hiring the right people becomes much easier and the raising of funds as well.
Step 4 - the next year and further
Now is the time to create the companies behind each, set a charter, raise real funding, build teams and grow to take on the world.
Kula Digital will be a classical startup business and focused on bringing Yoga and Education businesses on board starting with BodyMindLife. This may be Australian based or done as a Delaware LLC, depending upon the investors. This will follow normal SaaS KPIs with a sales/support force to implement the system. A spin-off set of businesses may be formed to handle the sale/implementation business or follow the partner model, property activity for community ownership and accessing the new asset tokenisation model and an education business but these are normal startup business in many ways. Kula is about bring on the users to the Vault3 wallet
Vault3 is the OnChain business that handles the process on the programmatic request and will need to conform the needs of regulators. This will also be a startup business which is HQ in a crypto friendly location. This will then create companies in each of the locations it operates in or Kula Digital works in. The companies will be split into two types, one is the transfer business which is a pure blockchain business. The other is the one that interfaces with the banking system. Each will need a team that meets all the rules and have a KPI linked to protecting customer funds. Spin outs will be the for areas like trading, cross border activities, Defi, wallets and other new functions that will happen. This will follow the startup path of a FinTech.
Finally is a Foundation that is the overall driver of this. This will end up being community owned as a not for profit business via a token model that has influence over each of the listed entities via a charter they are formed under. This is following a similar path many of the Blockchains have followed to build out ecosystems.
The target is to have 100,000 active members on the system paying $2-$5 per month by year end and earning a fee for each implementation, either by doing directly or through partners. It is a small number, but as with everything, this is the start of the hockey stick and managed early growth is critical as foundation building.
The other side is more subjective as is now about going out into the world to talk about our work and showing the impact it can have and having a users using this to point at with hard data makes this much simpler to be passionate about the impact this is having.
This is why the fund raising has to start as to put these foundations in place as will require lawyers and accountants to be involved to do it right, and then hiring the rest of the team in this competitive world means you must show that you have funds to pay at least one year of their salary and meet all your debt requirements so they can commit and this follows the trusted model being put in place, ie walking the talk.
The hard part is the classic single company doesn’t work as each have different forces being applied to them and need to be structured the right way to handle these forces with the people who fit those models. Something we have seen already in being told this is to complex for most investors.
Stage 5 - BHAG
This is where we want to be well into the future where the days of funds being held up by a middleman are consigned to history. Business no longer depend on the timing of cash flow to stay in business and not to be at the risk of others who control this timing.
When you have this trusted flow of transaction information, you can plan and support the activity that activates the transaction starting as you know the benefit of this.
As an example, a landlord would be incentivised to help a tenants business activate or the marketing team knows the more sales they make happen, the sooner they can be paid with part auto flowing through to the linked accounts or increase the return that is linked to true revenue. Now we are all part of an ecosystem that we can have influence on and not islands like what current business models operate under.
A Final word
This then opens up an area where each user has a digital wallet that they can be in control of, therefore potentially being their Own Bank as the normal banking system was built around being the clearing house has changed.
Final comment
Why put this all out there, the plan and strategy for all to see that others could take and use. While stealth or working quietly like we have done, works well in the early days to stop the noise and allow focus, once you are fully in the open, then you have to trust that you having something and know it so much better than everyone else.
We have an execution plan that can accelerate as needed without the speed wobbles and that is a key to make this all work. The background material behind this is like 50k lines of code that has been reworked a few times, 1k+ pages of documentation and and ideas, many dead end paths recorded, many pitch decks to summarise the work, 500M data points of analysis and many spreadsheets. Someone would have to work through most of this as well to get a strong execution plan but they will still be missing all the domain knowledge and information from human interactions that have been had to get a deep understanding, ie this is just a surface view.