There have been numerous questions among the community about prioritizing crowdfunding, e-commerce and lending, so this post is meant to clear up any confusion.

Points To Consider

When deciding whether to focus on certain features early on, in an early stage startup it’s important to consider the following:

How long will it take the company to turn profitable for each feature? How much work and how many employees are needed for moving in each direction? What are barriers to entry and adoption? (Do people really want or need a new product, or would something not be compelling enough for them to switch?)

This last point is arguably the most important, since if there isn’t a compelling enough reason to move the business in a certain direction, the amount of work or capital needed is irrelevant.

Risks Of Lending

Lending is a promising area in the long term, but will require more investment (both in time, money and resources) to turn a profit. Especially when borrowing internationally, it is no small feat to build a credit scoring system that helps keep all lenders and borrowers in check. There are various companies like Bloom working on newer credit scores, but these are still under development. While lending may be a promising feature in the long term, the extra time required to develop reputation systems makes it a less strong bet than crowdfunding and e-commerce. After ELIX is profitable, the company can add in lending if desired but in early stages this feature needs to be put on hold while the features that will turn the company profitable are focused on.

Overdevelopment is risky and drains company resources. In addition, it doesn’t pay to be sentimental about sticking to some original vision. Companies pivot, prioritize features, and change overtime. As investor Paul Graham writes:

Almost everyone’s initial plan is broken. If companies stuck to their initial plans, Microsoft would be selling programming languages, and Apple would be selling printed circuit boards.

In this case, the plan isn’t “broken”, it’s just that the priority and ordering of features is being rearranged to most quickly get to profitability.

Crowdfunding Market Growth & Size

Crowdfunding is expected to grow 175% between 2018 and 2022 globally.

By 2022 Transaction Value is expected to increase to 25.75 Billion. This gives us the ability calculate a compound annual growth rate from the data points {2018,9.342},{2022,25.75}. Using the formula:

We get a compound annual growth rate of 28.86%. Generally speaking, a CAGR of over 10–20% is attractive when starting a business.

Crowdfunding poses far less risk since backers and supporters often do not expect to be repaid, or have to demonstrate significant progress on their project before receiving funding. This means that less needs to be built before ELIX can turn a profit. Instead of needing to develop a credit scoring system, creators are responsible for providing convincing evidence that they’ll deliver often in a video that they make. Due to the market size of crowdfunding pointed out above, even cornering 10% would mean moving 2.5 Billion dollars through our platform by 2022, yielding 125 million dollars in revenue by that time.

E-commerce

In addition to crowdfunding, the company can also move into the e-commerce sector. E-commerce requires small adjustments, since rewards for crowdfunding projects closely resemble physical items for sale.

E-commerce as a sector is showing continuous growth:

The average CAGR for the e-retail sector is 8.3% from 2018 to 2022 in the United States. Although online retail is a larger business globally, the CAGR is less compared to crowdfunding in the U.S. Global CAGR is highest in India. For these reasons e-commerce remains a viable market as ELIX expands globally. The global average, as shown in the following diagram, is 9.6%.

This figure is also available here

Compared to crowdfunding, e-commerce contains many more competitors. Although there are only a handful of large crowdfunding companies, retail and online shopping options abound. This is probably because many online retailers started earlier (Amazon in 1994, for example) while companies like Kickstarter and Indiegogo started as late as 2009 and 2007 respectively. The compound annual growth rate for crowdfunding is higher for this reason. Some e-commerce companies like Target also already had offline presences before the internet, whereas for crowdfunding there was no offline equivalent. For these reasons, establishing a footing in crowdfunding should help define ELIX as brand. Simultaneously expanding into e-commerce should allow the company to grow rapidly.

Market Locations

Focusing first of US markets is good first step for several reasons:

Most website visits to elixirtoken.io come from US visitors. English is the primary language of most of our community members. US dollars are the most requested currency for on-boarding and “cashing out”. This remains true even after talking to crypto entrepreneurs.

Fiat Versus Tokens

After talking to creators inside and outside the blockchain space, we’ve determined that both groups prefer fiat as a native currency. Even blockchain companies usually pay their employees in fiat, since it the most practical at this time. In addition, it is estimated that less than 10% of the world owns cryptocurrency, so limiting ELIX to such a small market will put an potential upper ceiling on growth early on. It is often said in early startups to “do things that don’t scale” when referring to how you treat and onboard customers, but that saying should not apply to the business model as a whole unless you are starting a physical business like a barbershop or restaurant that could never expand as fast as an internet business. Adding many different coins early on to the app is example of doing something that doesn’t scale in a bad way.

In fact, using tokens as a form of payment early on prevented us from being adopted by creators we’ve contacted from sites likes Kickstarter. So, if ELIX uses fiat, how can we differentiate the company from sites like Kickstarter and Amazon while maintaining the utility and virality of ELIX tokens?

Tiered Or Linear Discounts

Tiered or linear discounts are an option to create utility for ELIX tokens, as well as drive growth. In a tiered discount setup, holding different amounts of tokens would entitle each individual to receive a discount or privilege within the platform. As an example of such a discount, imagine the following setup:

Creators and sellers use the platform to distribute products and fund campaigns. These individuals are moving some amount of fiat currency through their accounts, and are charged a fee in exchange. By having a certain level of ELIX tokens in the account, these individuals would be entitled to discounts. Here is one example:

Creators and sellers are entitled to the following discounts:

10% off all fees when holding 10,000 tokens 100% off all fees when holding 100,000 tokens

3. Every data point between 1 & 2 could be some interpolation of these two points.

Let’s say that over time more sellers, creators and users join the platform and more funds move through the platform every day per seller. A 10% discount on all fees might have only saved someone 1,000 USD over a month, but now the seller is selling 10x product per month, so that discount is now worth 10,000 USD to them. Since the value of each discount depends on the volume of a given creator or seller, the open market for ELIX tokens would reflect all of the demands (and anticipated future demand) of creators and sellers. As the platform scales up, the value of these discounts increases. A similar token discount setup could be applied to prices for backers and buyers.

Competitive Advantage Of Tokenization

The total supply of ELIX is limited, and ELIX is publicly traded on open markets.

Using virtual currency tokens in a fiat crowdfunding and e-commerce marketplace to receive discounts, free items and other membership benefits is a viral way to drive user adoption and involvement, and is something currently not offered by any other company in our space.

The idea of decentralized virtual tokens being traded on the open market and added into products is a relatively new idea. You can’t yet trade frequent flyer miles or amazon credits but in time many of these will become tradable assets on the open market. The non-custodial nature and limited supply of decentralized tokens makes them more attractive to centralized digital tokens. The competitive advantages of ELIX are also outlined in the blog post The Competitive Advantage Of Tokenization.

Since compatibility with the Ethereum blockchain is built in to the product, the startup can expand in the long term into emerging markets around blockchain. We can also drive more viral growth by incorporating airdrops to support other startups.

Decentralization

To avoid too much centralization, in the long term ELIX could release software tools for decentralized crowdfunding smart contracts that will benefit the Ethereum ecosystem as whole. In the early days of ELIX, however, the company will need to focus on profitability before releasing more experimental software.

We hope this write up has justified all the decisions we’ve made so far for ELIX. Please feel free to provide any feedback on our social channels!

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