Take a Chance and Bootstrap, or Raise Outside Capital?

Take a Chance and Bootstrap, or Raise Outside Capital?

By benlakoff | Charged Particles | 28 Oct 2020


Since early January 2020, Rob Secord has been working on the Charged Particles codebase on his nights and weekends while working as a Senior Engineer at PoolTogether.

What is “Charged Particles”? 

A unique combination of Decentralized Finance (DeFi) and Non-Fungible Tokens (NFTs). Literally the two biggest buzz words in the crypto community right now.

Charged Particles really started getting traction in 2Q20. In May, the Charged Particles private testnet version was launched, and in June was accepted into Gitcoin Kernel Accelerator.  The race was on.

October 2020, we went all in on Charged Particles. The protocol is nearly ready and we're excited to share it with the world.

Raise or Build

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It’s always somehow funny to me for startups to ask this question… Do we focus on building our product / getting customers / validating the idea OR Do we focus on raising capital?

This is not an easy answer as it varies GREATLY for each team member / project. 

What are the goals with the project / what sort of company do you want to build? What sort of investors are interested? What sort of capital is needed? These are just a few of the key questions that can be asked.

As a night & weekend project, it’s always tough to ship quickly (or, as quickly as you’d like). Team members have day jobs that pay for rent & food, and then in the off hours they’re always scrambling to push updates.

Raising capital from investors significantly changes the type of company you build, in a number of ways. 

Raising funds, in theory, allows you to spend more, iterate more quickly and get to market faster. But, investors also have expectations, which is fine, but it changes the nature of the project.

Personally, I’ve raised funds for companies I’m working on. Personally, I’ve been in leadership positions (including CEO) of companies that “failed.” “Failure” is not pleasant, but it’s especially not pleasant to fail a company where there are outsiders’ funds involved.

Charged Particles Capital Raise: $500K Quickly

For Charged Particles, we knew we wanted to go full time on the project and push it live as quickly as possible. 

To accelerate this process, capital always helps. Over the next few weeks we put together a pitch deck, a litepaper and sent out a few feelers to investors in the space. 

After a few messages, a couple emails and a few zoom meetings later (within a week)…. We had over $500K in commitments. 

A project that’s been in progress since January in the DeFi / NFT space? Yes, Investors were interested.

This was a higher number than we had initially thought to raise, AND had interested investors at a higher valuation than we had originally thought.

Decisions.

We accepted $0 outside investments

These were some great investors, and having spare capital would be wonderful. But ultimately, the decision was to NOT accept any outside capital at this point.

No, this does not mean that we “will never raise outside capital.” “Never” & “Always” are very strict words. Because yes, we are still potentially interested in very strategic capital. 

Either way, Here was our rationale for this decision to not accept outside capital, even when it was available.

Reason 1 - Project was “close” to launch. 

We’ve been working on this for some time now, and with a small team (2 Senior Engineers and 1 Non-Dev) the idea is that we can sprint quickly, iterate, and launch the product. 

Raising funds takes time, and focus/energy is on fundraising instead of shipping updates.

As soon as we go live, in theory we can start generating revenue to cover our costs

Reason 2 - Tokens / Equity

The ultimate goal is to decentralize governance of the protocol. The value, in theory, should go to the token holders and not necessarily the equity owners. 

For Canadian & American Team members - to pre-sell governance tokens is a very ‘grey’ area and (for the token to operate like we’d like it to), it feels very much like we’d be selling a security. 

Selling a security token isn’t completely an issue, of course, but to do it correctly requires quite a bit of legal work. 

We thought about going the DAO first approach, but ultimately didn’t feel like that provided enough liability protection for the founding team. 

Reason 3 - Spirit of the Project

Charged Particles has been a very community-driven project from the beginning. 

Taking outside investments at this stage of the project seemed like that approach would put the vast control of the tokens in the hands of speculators, rather than community members.

Fair Launch

We’ll go live in late November, and release our Governance token.

The Governance Token for the Charged Particles Protocol will be earned by ecosystem participants through our Liquidity Mining program, which we will announce the details later.

The majority of the rewards will be distributed to the community and rewarded to users for participating the Charged Particles Ecosystem as they:

  • ‌Mint Particles
    • Creating NFTs via the Charged Particles Minting Station.
  • Energize Particles
    • Creating Charged Particles - Charging up NFTs by depositing ERC-20 tokens that are converted to Aave’s aTokens.
  • Provide liquidity to key trading pairs on Decentralized Exchanges.

Users are able to discharge their NFT, collect interest accrued & Governance token rewards at any time. 

Note: Token does not exist yet. Amounts have not been set yet.

Grants

Interested in contributing to the Charged Particles Community before the Fair Launch of our Governance Token? Let us know!

The community can still contribute via our Gitcoin Grants page  - we are so grateful for any contributions

We’ve also already applied for a number of grants within the ecosystem - E.g. MakerDAO, Aave, mStable, etc. -  If you know of any eligible grants - please let us know in our Discord

We very believe that our incentives are very much aligned with a number of DeFi Projects and by executing our protocol successfully we can add a lot of value to their ecosystems. 

For example, we’ll encourage the use and adoption of MakerDAO’s DAI as users are able to deposit DAI into their NFTs, and it’s automatically converted to Aave’s aDAI. Thus contributing (and incentivizing via our governance token) the use of each of these core DeFi cryptocurrencies.

We’re looking into a number of other DeFi Yield-Bearing cryptocurrencies and would be happy to speak to these teams about working together to encourage more adoption and use of their tokens via Charged Particles. We’re open to collaborate with a number of DeFi and/or NFT Projects. Please reach out, we’re most responsive on our Discord!

Find out More

We are moving at a rapid pace, so we encourage everyone to join our Discord for the latest updates or follow us on Twitter.


benlakoff
benlakoff

Head of Business Development at 2key


Charged Particles
Charged Particles

A protocol fusing Decentralized Finance (DeFi) and Non-Fungible Tokens (NFTs). Users to deposit a primary asset such as DAI into their NFTs, which is converted to a yielding asset (e.g. aDAI). Principal & interest (“Charge”) from the deposit asset in then “locked” into the NFT.

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