The Otonomist - May 2023 Special Issue
Earlier today, we pushed our online fundraise live, opening a first tranche of up to US$2MM shares in Otonomos exclusively to our clients and their referrals, before we open the round to the wider community and outside investors. In this issue of The Otonomist, we talk about why we want our users to own us, and how we made it easier for them to club together and act like a collective VC in Otonomos.
We owe you. Now you can own us.
Join the Otonomos Funding Club to invest in our first external capital raise, together with other users and our wider community
End April, we announced we were going to free up genuine equity to let our users and the wider community purchase shares in Otonomos online, on best terms, and in crypto.
Today, we pushed our online Funding Club portal live, combining the spontaneity of ICO-style capital formation with the controlled process of who we can raise from under securities regs as they stand:
All existing clients of Otonomos have received login credentials by email and will see their Investor Profile pre-populated. They can immediately participate in the first tranche on best terms by simply making the necessary certifications.
In addition, all clients are given a unique referral code and will receive top-up equity if their referrals co-invest with them.
Non-clients can create an account on our Portal and submit their Investor Profile online, including upload of proof of ID and residency, and invest after making the necessary certifications.
The entire process is online and automated, with full transparency on deal terms and round dox, including the legal agreements that protect your rights as an investor.
> Sign-in or create an account on the Otonomos Funding Club portal and participate in our round after submitting your Investor Profile.
Club together and act like a collective VC in Otonomos
You participate in our round by joining Otonomos Funding Club LLC, a special purpose vehicle that issues Otonomos Mirror Tokens as proof of your membership interest
As an investor, you become a Member of a special purpose Delaware LLC, Otonomos Funding Club LLC (the “Club”) which we created using OtoCo and whose sole purpose - as reflected in its Operating Agreement - is to acquire shares in Otonomos Holdings, our top level company where all our revenue accrues and which is ultimately set to exit.
This onchain LLC, which is setup as an investment club and governed by its Members using OtoCo’s smart contracts, will get Preferred shares in Otonomos Holdings and a Board seat.
The Club is the issuer of Otonomos Mirror Tokens (“OMTs”), which represent your percentage ownership in the Club. You electronically subscribe to the Club by purchasing OMTs, which can be paid for in crypto or fiat, and every OMT you hold buys US$1 worth of shares in Otonomos Holdings.
OMTs only get minted in return for actual money invested, with base and volume bonuses kicking in depending on the tranche you invest in and your purchase amount.
This mechanism guarantees that, irrespective of how many other Members join the Club and how much we ultimately raise, the amount of OMTs in your wallet will always translate into an equivalent dollar amount of shares in Otonomos Holdings.
> Join our dedicated Telegram group today for more details or if you have questions.
You should invest in Otonomos if you agree with (most or all) of the following:-)
1. We’re seeing an unprecedented wave of entrepreneurs in Web3 and AI who will all need legal wrappers ✔︎
We’re seeing an unprecedented wave of entrepreneurship in Web3, compounded by an acceleration in AI startups. More projects and ventures coming to this space means a growing demand for entity setup and maintenance, Otonomos’ core business.
By investing in us, you get “pick-and-shovels” exposure to a new tech ecosystem, without direct risk from investing in individual ventures or buying project tokens.
2. Company formation and corporate services is a big market ripe to be eaten by software ✔︎
At an estimated annual spend of US$ 100 billion, the current market for company formation and corporate services is twice the size of the global music market (be it less glamorous…).
However, anybody who serially forms companies will recognize corporate services as one of the last bastions of paper-based ritualism, screaming to be dragged into the 21st Century, in the same way so many other analog processes have become digitized.
Incumbents in this space have zero tech and that is where our opportunity lies.
3. Otonomos is best placed to become the go-to name for doers and investors in blockchains and wider tech ✔︎
Web3 and tech companies expect digital solutions to remove analog friction, which is why our tech appeals and why we focus on this early adopter market.
Our thesis is that even though there may always be a “last-mile” manual filing component, 90% of the process of company formation, funding and governance can be digitized and automated:
Our e-commerce style homepage allows users to order entities à la carte by simply adding them to a shopping cart and checking out using crypto or fiat.
After checkout, users can instantly start assembling their company online in simple logical steps. As an example, check out how we recently brought the staging of a British Virgin Islands company fully online.
Once formed, users can remote-control their entire universe of entities, with all additional entity-related services served up via our browser-based dashboard, allowing for continuous upselling by Otonomos.
Further down the line, once the use of wallets and blockchains is commonplace, we will be ready to form entities natively onchain and smart-contractify all business logic!
4. We’ve shown solid traction and further investment in our tech will allow us to scale our business from here ✔︎
Our early traction is clear validation of product/market fit, with over US$1.6 MM in revenue in 2022, our first full year of operation, and the number of clients projected to double each year over the next years.
The automation and technology we bring to this space should allow Otonomos to scale much faster than incumbents. In essence, instead of being a corporate service provider with additive tech, Otonomos is first and foremost a tech company that applies its software solutions to the company formation and maintenance space.
5. The business model of a corporate services provider is powerful mainly thanks to its recurring revenue ✔︎
This translates in a powerful business model for Otonomos:
Our initial cost of goods and client acquisition is immediately covered by the one-time payment users make when ordering a company. This means that every order is profitable from day one.
In addition, our clients pay all the annual dues related to their entities upfront, resulting in an ever bigger payday for Otonomos as the number of companies we look after grows.
Scaling through tech vs. adding headcount allows us to compress the marginal cost of every new entity we incorporate and do things faster, cheaper and more efficient.
6. Our team feels they were put on earth to do Otonomos (ask them!) ✔︎
In our minds, investors should really only worry about one thing: will the team stick with it.
Our core team has seasoned business builders, technology talent and domain experts in equal measure. We all plan to be at it for a lot longer still!
7. Otonomos has been a favored child of the crypto community since the early days ✔︎
We started coding on Ethereum before the launch of its mainnet and were there to help the Ethereum Foundation itself and early Ethereum projects such as Maker, Gnosis, Status, etc. with their legal stack, before we decided to build Otonomos into a business.
So far all our sales have been inbound and we still do not have a marketing effort. It is the community that carries us and that is why we want to give it a carry in us.
8. There is no household name (yet!) in the company formation and corporate services space ✔︎
Legacy players are fragmented and have zero tech. New players may do a subset of what Otonomos does but nobody brings it all under one roof. There is no household name in this space.
Otonomos therefore has a chance to become the first name doers and investors in tech think of for their company formation, funding and governance.
Arguably, Otonomos’ total addressable market is the 4 billion or so people on the planet who are within the working age bracket!
Why do we raise?
Otonomos could comfortably continue to grow in a self-financed way. For any Founder, that’s quite an attractive proposition.
However, there are two main reasons why we are opening this first external round:
We feel strongly about the idea of user-owned companies. We hope the experiment we’re running today may prompt more people to seek funding from their own community by issuing compliant “DeFi securities”, which is why we are open-sourcing all of our round legals and will soon make the online portal itself commercially available.
We do want to make sure we invest in our growth. The initial US$2MM we are looking to raise will allow us to add to our developer bench and spend more on growth.
> Access our slide deck here to get more detail on what we plan to do with fresh capital and the milestones we have set ourselves for the next 18 months out.
With special thanks to our U.S. legal counsel for helping us solve the legal puzzle, and a very special mention to our brave developers in the Ukraine who delivered the online portal within record time despite everything that is going on there.