Not Boring by Packy McCormick
Not Boring by Packy McCormick
Fairmint & the Democratization of Upside (Audio)

Fairmint & the Democratization of Upside (Audio)

Welcome to the 937 newly Not Boring people who have joined us since last Thursday! If you’re reading this but haven’t subscribed, join 20,818 smart, curious folks by subscribing here!

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Hi friends 👋,

Happy Thursday! 

Check my pulse. I’m excited. This is my first collaborative essay, and my collaborator is someone I’ve been a huge fan of for a while: Sari Azout.

Sari is an early stage investor, strategist, and author of one of my favorite newsletters, Check your Pulse (go subscribe now and come back).

Subscribe to CYP

Last week, she wrote an excellent piece on community-curated knowledge networks and is building a product in the space that I cannot wait to try.

Not Boring is all about telling the stories of the very big companies that have an outsized impact on the world and the markets today, and the very small companies on the bleeding edge that will shape the future. Sometimes, those companies are so bleeding edge that to explain them well in context, I need to bring in someone who’s gone deep in the space. For social and programmable money, that person is Sari.

The subject of today’s essay, Fairmint, has the potential to be massively impactful. Its total addressable market is “equity” and it has the potential to expand that multi-trillion-dollar TAM by including more stakeholders in upside, aligning incentives, and unlocking new business models.

Let’s get to it.

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Fairmint & the Democratization of Upside

Radical Compensation 

The history of financial innovation is the history of democratizing access to upside. As more stakeholders share in the wealth they create, they’re incentivized to collaborate, experiment, and innovate. There would be no Silicon Valley, for example, without the Employee Stock Ownership Plan (ESOP).

When a group of engineers known as The Traitorous Eight left Shockley Semiconductor Laboratory to found Fairchild Semiconductor in 1957, investors rewarded their treachery with a new type of compensation: stock options. If Fairchild did well, they would do very well. 

Options seemed radical then; they’re commonplace now. Startups are risky, and they don’t have nearly as much money as their more established competitors. Options, which give employees a small chance at a life-changing payout, are how startups compensate for that risk, and they’ve been the pixie dust that has fueled Silicon Valley’s meteoric half-century rise.

When the products startups made were things like microchips and database software, it made sense that the employees should share in that upside. But what happens when the boundaries between employment and work begin to blur? When people become the product.

In just the past week, both Airbnb and DoorDash filed their S-1’s ahead of going public. Many employees and investors will become multi-millionaires. Some will officially become billionaires. Uber and Lyft have added more than $30 billion to their combined market caps over the past month, enriching investors and employees alike.  That’s a beautiful thing. The American dream. 

But millions more who fall in a new gray area between “employee” and “product” -- the Dashers who deliver your food, the drivers behind the wheel of your Uber and Lyft, the influencers who create content on Instagram, and the Hosts who let you into their home -- don’t participate in that upside. 

The result is that the economic interests of the largest internet platforms are poorly aligned with their most valuable contributors, their users.

User-Generated Everything

The digital economy has radically changed the nature of the relationship between customers and corporations. Individuals have switched from being passive consumers to being an essential force in creating value, either through their actual work (Airbnb, DoorDash, Uber, Sofar artists, Wikipedia editors, Airbnb hosts) or their data (Facebook, Google, etc). Today, the user is not only the consumer. The user does the work. 

In the gig economy, users who contribute time and data are rewarded linearly — to earn more, an Uber driver needs to drive more. The platform grows exponentially, while the platform’s most important asset — the driver — earns linearly. 

As large platforms get richer off their users’ personal data and time, people are trying to regain control. We spent the last fifteen years working for gig money, likes, retweets, or follows. The platforms gave us reputation or cash, but no ownership, upside, or voice in its evolution.

But the balance of power is shifting, and companies are recognizing the need to better align with their users.

Over the past few years, we’ve been seeing a lot of experiments in this space. 

  • Andrew Yang’s Data Dividend would force platforms to pay users for their data.

  • California’s AB5 would have forced Uber and Lyft to treat drivers like employees instead of contractors until voters supported Prop 22, which exempts gig economy companies… for now. 

  • Denim startup DSTLD became the first customer-funded fashion brand when it raised $1.7 million from customers via crowdfunding in 2016, and gave away equity to shoppers who shared the brand. They tripled sales that year. 

  • In 2016, Juno tried to take on Uber by offering its drivers equity in the business. The next year, it sold to Gett, which shut it down in 2019.

  • In 2018 and 2019, several of the biggest tech companies, including Uber and Airbnb, filed letters to the SEC, asking it to allow them to share ownership with their users.

  • Just this past week, Packy got an email from Airbnb letting him know that, as Host, he was eligible to buy from an allocation of IPO shares. Those shares have typically been reserved for banks and their clients. 

Those attempts have been clunky and largely unsuccessful because platforms have used old tools to solve new problems. 

The Internet is a new way to interact, so it’s only natural that 40 years after its invention, we will come up with digitally native ways to distribute and exchange value, unconstrained by legacy financial infrastructure. 

Just as the first online ads looked a lot like print ads and have since evolved into digitally-native formats, we should expect digitally-native ways to distribute and exchange value on the Internet.

We need tools for the next era of social networks, creators, and businesses to engage with their community while monetizing along the way. The time is right. 

  • Cultural tailwinds support inclusive economic models as opposed to the extractive models that defined the first decade of the gig economy. 

  • Software is eating the markets, giving more people knowledge of, comfort with, and access to, new investment opportunities.

  • Crypto is making it possible to financialize everything

Bitcoin is ripping, up 57% over the past month heading into Thanksgiving. It’s eerily reminiscent of the 2017 Crypto Bubble, but it’s different this time. With use cases becoming clearer, Crypto 2020 is much more about the infrastructure on top of which a wave of killer apps are being built. 

Web3 and Crypto

If we assume that the WWW has revolutionized information and the Web2 revolutionizes interactions, the Web3 has the potential to revolutionize agreements and value exchange. It changes the data structures in the backend of the Internet, introducing a universal state layer, by incentivizing network actors with a token.

-- Shermin Voshmgir, Token Economy

“Crypto” comes with a lot of baggage, so it might help to boil it down to the three main use cases in the context of the Ownership Economy:

  1. Financial. Raise funding that communities, creators, and companies need to create things while aligning your upside with early fans, workers, and other participants. 

  2. Social. Create a community around you in which your fans and users engage and become your distribution. There’s also an element of social signaling that you were the first involved, and tiered access to exclusive rewards. 

  3. Governance. Give stakeholders a voice in the decisions about your business, platform, or community. 

It is still incredibly early. Instead of thinking of crypto as a full-fledged product, think of it as a new set of tools engineers and entrepreneurs can use to build. Just as the internet in the late ‘90s was engineering-heavy and design-light, crypto thus far has focused too much on the technology and not enough on the user experience, too much on what is technically possible and not enough on how it can improve people’s lives. 

There is a vibrant ecosystem of new projects that are powering the infrastructure for social tokens, including:

  • Props Project is a turbocharged loyalty program that rewards people with tokens for doing things like sharing and engaging. 

  • Foundation bills itself as “Culture’s Stock Exchange,” and features a collection of crypto art that users can invest in and trade. 

  • Zora is a marketplace to buy, sell, and trade limited-edition goods by buying one of a limited supply tokens that’s exchangeable for socks, t-shirts, and more.

  • Roll mints branded tokens, or social money, giving people and communities their own custom tokens like $SARI, $PACKY, $THANKS, $HOLLA, or $RNG.

Social tokens provide fans a means of not only sharing financial upside with their favorite creatives but also enable tiered, tokenized access based on fan engagement. For example, Richard Kim’s Random Number Generator is a Discord server for founders and investors in the gaming community in which status is determined by the amount of $RNG users hold. Users earn $RNG (minted on Roll) by signing up early, doing cool things for the community, creating, and winning competitions. Members can use the $RNG they earn for both exclusive access and for financial gain, as Kim plans to create fiat liquidity for $RNG holders. 

Social tokens allow creators to own, control and coordinate the value that they create across platforms, like a digitally native rewards program with upside for both creators and fans. 

But as much as crypto fans want to believe they’ve created something startling and revolutionary, in reality, the experience feels: unfamiliar (payments happen off-platform), overwhelming (you end up in a confusing maze of wallets - jumping from Coinbase to Metamask to Uniswap, often unclear what you own), and pyramid scheme-y.

In an excellent post, Kim reflects on the challenges of token-based communities: 

Whether they acknowledge it or not, tokenized communities are so focused on token price that they lose sight of why they were created to begin with--the shared values and interests, the intrinsic motivators, the glue that is left when all other bindings are stripped away.

This is common with new technologies -- the first iterations focus too much on the technology itself instead of the user experience the technology facilitates. 

Social tokens represent one step in a fundraising progression -- from traditional cap tables and ESOPs towards more programmable, easily exchangeable money that fits into the flow of a well thought out user experience.  

Like social tokens, Fairmint is built on DeFi rails, but unlike them, you wouldn’t know that from looking at their site. Defi is part of Fairmint’s tech stack, not its main value prop. 

Meet Fairmint

Fairmint is like Kickstarter on steroids, mixed with Carta, embedded right in the products we use and love. They’re building the picks and shovels for founders to turn their equity into the most powerful tool to engage with their contributors. 

Equity powers the entire stack of entrepreneurship and is the most powerful tool to align financial interests. It has a simple value prop: help make this company more valuable, and you will be rewarded. Equity is the reason startups can write that bullet that goes something like...

  • Be a team player. Be willing to get your hands dirty, go above and beyond the responsibilities of your role, and do whatever it takes to help this company reach its full potential! 

...on every job description, with a straight face. 

It is also the greatest wealth-building financial instrument. Until now, the absence of a single, global, open, and interoperable system of record for equity has hampered innovation and the democratization of equity ownership. 

Luckily, global, open, and interoperable systems of record are what crypto does best, and Fairmint is using it to build “software-powered financing services to raise capital continuously from anyone who supports their product and mission.”

Fairmint created the Continuous Agreement for Future Equity (CAFE), an updated version of Y Combinator’s SAFE, which lets a company’s stakeholders buy or earn equity in the company, at any time, directly from their website. It’s “programmable equity.” Companies will be able to add a “Buy Equity” button right to their site as easily as they add a “Buy with Apple Pay” button today. 

Importantly, users and investors don’t need to know or care that they’re dealing with a DeFi product. They only need to think about how the product benefits them:

  • Founders benefit because fundraising is no longer a full-time job. On Fairmint, founders raise funds on a rolling basis in a “set it and forget it” fashion. They can set up automated incentivization plans and align their stakeholders with their success. And it gives them flexibility -  if they don’t want to sell and if an IPO is not in the cards, their investors can still get liquidity. 

  • Investors benefit because they get a clearer path to liquidity and can invest in the companies they love and trust at stages usually reserved for insiders and VCs. 

  • Users benefit because they can participate in the financial upside, either by purchasing shares or earning shares for supporting the company.

Shares sold via Fairmint are dollar-denominated and look like any other investment you might own. 

Fairmint abstracts away a ton of complexity, so users can focus on how they might use Fairmint to grow their business. Our heads are swimming with possibilities: 

  • What if Wikipedia was owned by the editors? 

  • Could the small businesses that list on Yelp, or the contributors who power its ratings, own shares in the company? 

  • Could Reddit reward its moderators with ownership? 

  • Why couldn’t Airbnb give Hosts equity when they become SuperHosts? 

  • Shouldn’t Uber’s drivers own a piece of the business if they maintain a high enough rating over enough rides? 

  • Would writers be less likely to leave Substack if they owned a piece of the company?

  • What if early users of SaaS products could invest in the company itself? My mom has been singing Zoom’s praises since 2014. She’d be retired if they worked with Fairmint.

  • What if Taylor Swift’s fans could replace Scooter Braun

And these are just the businesses that have been able to thrive with existing financial infrastructure. What kinds of businesses could work with Fairmint that couldn’t have before? 

One area that seems ripe for this model are marketplaces with particularly challenging cold-start problems. A marketplace cannot acquire demand if there is no supply, and  the supply side has no incentive to join if the demand isn't there. This makes marketplaces extremely difficult and expensive to build. Many marketplace companies either fail or are forced to raise a lot of venture money so they can try to spend their way to liquidity. What if, instead, they incentivized early participants with ownership in the company? Instead of just “supply,” marketplace participants become loyal builders and evangelists. 

If companies can provide incentives for early adopters to participate before critical mass is achieved, they’re more likely to pose a credible threat to incumbents. As Charlie Munger said, “Show me the incentives and I’ll show you the outcomes.” A lot of business models that failed in Web 2.0 will become viable in Web3. The next generation of platforms like Homejoy and TaskRabbit, which solved the marketplace liquidity problem only to suffer from “platform leakage” as customers and providers took their relationship offline after the first transaction, could stand to benefit from aligning their incentives with the people who do the work.

Coming full-circle, could CAFEs replace the traditional ESOP that has fueled Silicon Valley’s growth, facilitating more liquid employment while retaining the benefits of equity ownership? The current model -- negotiate an options grant before you’ve started working and slowly earn those options as you spend more time at the company -- is a clunky solution that optimizes for lower administrative burden and keeping employees at the company. Worse, employees who leave before an exit often can’t afford to buy shares today and hope for an outcome later, and give up the right to buy their shares, missing out on the upside. 

But what if companies could give employees equity on an ongoing basis based on their contributions? There are countless examples of more junior employees making a bigger impact in two productive years at a company than some execs make over four years, but the current structure isn’t set up to handle those cases. And ongoing liquidity would be hugely valuable in ensuring that all employees are able to make money from the shares they’ve earned. 

When stakeholders -- partners, investors, creators, evangelists, and employees -- are properly incentivized, the possibilities dwarf the imagination. 

Idealism aside, though, Fairmint will face a few key challenges in making that future a reality. 

  • Ownership Distribution. Nailing an effective ownership distribution that incentivizes the right behaviors is VERY hard. Fairmint will need to give companies templates and best practices to help them get started. There will inevitably be a period of trial and error here. 

  • Product Marketing. Explaining what Fairmint does is a challenge. They’re currently explaining it simply as “the ESOP for customers,” and it seems to be working. 

  • Double-Edged Switching Costs. There’s no such thing as a “free trial” with Fairmint. Once you decide to use Fairmint and sell shares via a CAFE, switching to another model is a huge pain. That creates high switching costs, but also barriers to adoption. 

Fairmint has its work cut out for it, but we’re rooting for it to succeed. A world in which Fairmint is successful is the kind of world we want to live in. 


There’s this recurring theme on the internet (and with people more broadly): When something is easy, people will do more of it. 

Creating content was the first thing that became easy on the internet, and more people began to create content. WordPress turned people into bloggers. YouTube turned them into videographers. Substack is turning us all into newsletter writers. 

Likewise, if creating and sharing value becomes easy, more people will do it.

In the same way the internet was a democratizing force that gave everyone in the world the ability to easily create and share information, the next step is to give everyone in the world the ability to easily create and share value.

Better economic alignment between platforms and participants is coming, and will enable the advent of true stakeholder capitalism to give billions of people the opportunity to build wealth alongside the products and services they love and use. 

New technology is powerful not because of what it can do, but because of what people can do for other people with it. Crypto can create new financial models, and those new financial models can in turn unleash a monsoon of creativity and new business models. Fairchild Semiconductor’s investors couldn’t have envisioned Fairmint when they decided to incentivize the Traitorous Eight with upside in the business. But with hindsight, we can draw a wavy line from one to the other. 

Driven by network effects, technology has radically changed the pace of wealth accumulation. It took Hyatt 63 years to be worth $7 billion. It only took Airbnb 12 years to be worth $18 billion. 

Crypto’s true promise is the ability to usher in a new economic operating system where distributing that value is as easy as paying payroll. One that can close the wealth gap by pulling wage earners out of the debt stack and into the equity stack. One that allows people to share in the upside and ultimately shift the paradigm of ownership to the individuals and communities responsible for creating value. Viewed through that lens, Fairmint is more than a product; it’s a movement.

Trying to write thousands of words every week with a new baby is exhausting. So since the Zest Tea team sent me some of their high caffeine teas a couple of weeks ago, I’ve had one every day. My favorite is the Spiced Chai Infusion Sparkling Tea (please send more, Cou!). 

They have more caffeine than coffee, without the jitters or crash, and they’ve helped me maintain prolonged focus despite my suboptimal sleep schedule. If you’re looking for clarity in the chaos, get yourself some Zest, and use code “notboring” for free US shipping.

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Thanks for reading, and see you on Monday,


Not Boring by Packy McCormick
Not Boring by Packy McCormick
Business strategy, but not boring, delivered to your ears and your inbox every Monday and Thursday morning.