The below is a full (unedited), machine-generated transcript of a Youtube session / podcasting episode I recorded with Casey Fenton, founder of Couchsurfing and Uptock in December of 2021. You can view the video/listen to the podcast on Youtube, Apple Podcast, Stitcher or wherever you get your podcasts.
Erasmus Elsner 0:06
Let’s roll. Welcome, everybody. I’m super excited to have with me today, the OG, the grandfather of the sharing economy, Casey Fenton, the famous creator of couch surfing, who will be joining me today to talk about his journey from building couch surfing to becoming a real modern day philosopher to many of us to now building his next project up stock. Casey, are you ready to take it from the top here ever,
Casey Fenton 0:31
I suppose. Thank you so much for having me today. You told me a little bit about what you want to talk about. Now. It’s really excited. There’s a lot to cover for sure. thankful to be here.
Erasmus Elsner 0:39
So I want to hit it off really with this great backstory, which is you coming out of I think it was high school, you really wanted to travel the world. And you wanted to go to Iceland of all places. And the goal of the trip was to really make local connections. And you had a slightly unconventional way of doing that. You went to the website of the local university, the University of Reykjavik, and you’ve scraped that website for email addresses using I think, like a PHP scraper, and then emailed I think, 1700 people, which was surprising around replied, and that’s sort of how it all got started. But maybe take us back to his first proof of concept.
Casey Fenton 1:17
Sure, yeah, I guess it was an MVP, whether I realised that at the time or not, I just knew that I needed something like that. I was, you know, early days, in my travels, I was feeling like just a small person in a big ocean, everything seemed big and scary and kind of far away. And I was working on like one of my first companies, and I just was like, I just really want to try out this idea for culture that had the idea, but I hadn’t had a chance to try it. So as I did back, then I would just buy cheap plane tickets to somewhere anywhere that was like kind of on sale. And I had a cheap ticket to Iceland, and I was leaving, you know, got it on Monday, and I was leaving on like a Thursday or Friday or something. And like you said, I was able to extract 50 and 100 names and email addresses and construct an email merge and PHP and a script to go through mail merge and, and send them a personalised message with their name. And it just trying to make it personal and about personally about them. And personally about me, I didn’t have a lot to go off other than their name, unfortunately. But it was, you know, just trying to see if there is like, hello, is there anybody out there who wants to meet other people, and having to have an experience of some sort. And just the overwhelming response that blew my mind. And I was super excited to go and hang out with quite a quite a few people there. Just in a few days and a long weekend. And I’m really, you know, the MVP proved itself said, Okay, I have to travel like this every time they can’t, how can I not travel like this, I guess is
Erasmus Elsner 2:41
you ended up staying with an r&b singer who took you then to a party with lots of models. It sounds like the perfect couch surfing experience, right?
Casey Fenton 2:49
Kind of I mean, you think so stereotypically, but it was way in over my head, it was really easy for me being a super shy person. That was about the most probably most challenging thing. One of the more challenging things I could do, because I don’t know how to talk to people. I’m just following them around very awkwardly, like I don’t fit in here and trying to be cool, or just trying to say something that doesn’t seem super uncool. And they were really, really nice. They’re really sweet. And after some time, we were just laughing, like friends and going on adventures. So it was it just really It’s heartwarming, I guess
Erasmus Elsner 3:30
couchsurfing has often been described as the back pass to the world, as well as the world’s largest tourist experiment, going into travelling and seeing people outside of your normal social circle, not just outside of your country. I think that’s one of the key fascinations that I always had with couchsurfing. Let’s talk about something quite interesting. You were actually a not for profit five, a YC. company initially. And there was this great story that the IRS wouldn’t actually let you qualify as a non for profit company and then sort of forced you out of that status.
Casey Fenton 4:03
Yeah, I think that part of it could have been timing. I mean, there’s a lot going on, then wait, by timing, I mean, that the IRS a couple of years before that, I think they had no egg on their face, so to speak, because I think it was a Stanford research study that made fun of the 501 C three departments in saying they’ll they’ll approve anything. In fact, here’s a list of five or 10, completely ridiculous sounding charities that you can look at, you’re like, who would approve that? So they were feeling a little maybe embarrassed? It’s just my idea of how why, like, why wouldn’t they approve couchsurfing? We’re clearly we thought clearly terrible. It’s clearly about cultural exchange education. And after we fought with them spend a half a million dollars in like five years fighting with them. And finally, they gave us back the response and they said all 10 ways in which you’ve articulated with high end lawyers that you’re charitable in, you know, we’re like this. It’s like an online community at centre. It’s like this. It’s like this kind of cultural exchange, just like we’re trying to come Add ourselves to all of this existing case precedent. And in all of the ways they deny every single one I’m just accompanying you deny every single one that just seems like imagine some maybe, maybe not, but not all of them. And I got them on the phone finally. And it was I was surprised because it was not only our examiner, it was her boss and your boss’s boss, and, and they’re all three, read over the denial. And they’re like, Yep, that’s it. Don’t apply this. Don’t go to the ombudsman anymore, just get out of here. And so can you just level with me? Like, why is this like, we just it’s like, we’re pushing this boulder uphill. And now you’re just saying get out of here. But I just need to know why. And they said, it just seems like couchsurfing is a way to save money. In fact, you should probably be asking people to pay taxes on the value they’re receiving from staying at people’s houses for free, right? I mean, there’s clearly some value there. Can you have you thought about estimating the taxes and sending them at 1099? I was like, Are you kidding me? So I just like, please don’t do that. And, you know, I just had to really kind of realise that it was just not going to happen there. I just, I couldn’t think of any other, any, any any other things to do. It was right around that time that B Corp started to come out the one that you don’t have to seek to maximise shareholder value that’s like, Delaware, C corpse and other regular type of corporations. That’s kind of the the, the idea is you’re supposed to maximise shareholder value. Anyway, be corpse, you can maximise stakeholder value, you can name all your stakeholders, I said, Okay, that seems like a reasonable way to go. So then we had a whole next chapter of like, how do we even do that? You know, it was one of the hardest things I’ve ever had to do in my life, that’s for sure.
Erasmus Elsner 6:32
And then benchmark actually ended up buying you out? Because there was like this time limit of I think, six months were by your need to have converted?
Casey Fenton 6:42
Yeah, no, I wouldn’t say by no, that sounds like a whole acquisition. Right.
Erasmus Elsner 6:47
I think you’ve talked about that. Formerly, if you seize the status from the 501. C, then you have like a timeframe whereby the assets have to be transferred to a four. Yes, that’s what I meant. Yeah.
Casey Fenton 7:00
Yeah, that part? That’s correct. So basically, when you have the assets in a charity, like, for instance, the New Hampshire Charitable Trust, as it’s known, everybody who it who lives in New Hampshire owns all the 501 C threes technically works for the nonprofit. So if you want to remove assets from that Charitable Trust system, you have to figure out what the fair market value is, and you have to get that money. So where do you get the money you can’t get from yourself? Right? You have to get it from somewhere else. So it’s like, we’re like, hi, looks like Oh, my God, this is like this insane situation. And this couch, I was like, this was the most crazy legal expensive catch 22. You can imagine. They’re like, Alright, how do we figure this out? And if we don’t figure it out in a certain amount of time, maybe you know, the company’s completely dead. That’s when we started saying, Okay, who who can help us by this out? And one of my co founders actually lived in Palo Alto, near Sand Hill Road. And he said, Well, I’ll just go talk to some of these people here. Could they help us, but then and do this quickly, but then also keep the entire community intact with all of these different protections? You know, whether they be open to that. So we finally found an investor who would do that most are like, No, I don’t want anything to do with that. It’s too crazy, this crazy community. And then we finally found one, and that was really, really thankful for that. But it took a long time to figure it all out. Everything had to work for the company to survive. And if not, it was a company. It’s a huge Jeopardy.
Erasmus Elsner 8:19
Yeah, for sure. And it wasn’t just any investor, it was one of the best venture firms in the Valley. So you got them with this legal, this legal mess. But let’s go one step back on the minimum viable product before you even got into the situation. And what I liked about this was this reflection of you coding it, and really writing functional, minimal code in the beginning, really like in the spirit of many indie hackers today, while you were staying on the couch of a friend in Alaska. So talk a little bit about this heavy lifting before everything got started.
Casey Fenton 8:50
Yeah, I think you know, with any problem, I’m a computer programmer. So the first thing I go to is, maybe some code could solve that there must be something, let me think, and just sit there thinking about some code that could solve this problem. And so the problem was, is I want to go and stay with other people, and then come stay with me. And we can all do this together. And so of course, I thought of social networks. And so he started bugging me right around the time, like Friendster was coming out. So it was, I think that was kind of on people’s minds. And sorry, cat is climbing the wall here. So yeah, so he just started just trying to use the nights and weekends while I was working on a US Senate campaign here in Alaska, to work to work on this and other people got to the bar and just stay home and say I got to see about a thing. And I you know, I was already a computer programmer for years, but this really sharpen my skills. Because, you know, when you get that feedback loop, you get people saying, Oh, my God, this is really good. I really appreciate this, this experience I had with another person and makes you just like, Okay, I’m gonna stay up for three days straight in a basement and just keep programming. You know, I’m not going to stop ever. And so that that feedback loop is so important, especially when you’re starting companies. I think people always say, Okay, I gotta get through this. I’m gonna make them anything perfect, I gotta embrace the money, I’ve got it whatever, like, No, you got to create a feedback loop where people start telling you what you’re doing is good and helpful to them. And then that will be your fuel more than anything to make this thing happen. So goes along with all the Lean Startup MVP stuff anyway,
Erasmus Elsner 10:15
you were really feeding on this positive feedback and having real people travel to real places. And it’s something that that brings me to the next topic that I thought a lot about when thinking about couchsurfing, this delta you really have between value creation and value capture. In the beginning, I think there was no business model at all, because it was planned to be a not for profit organisation, which which would have survived by donations. Right.
Casey Fenton 10:41
Yeah. So just real quick on that what we, you know, when you before you get the 501 C three designation, you’re allowed to operate as a 501 C three as they’re examining it. So what we did is we said, Okay, we we guess we survived by donation, do something. So we put in, I put in the verification, and that was we’re like, is this a service? Is this a donation? We don’t know. We’re just trying to figure that out. And the IRS is going back and forth on like, this is not really a donation. This is kind of a service. And then we’re like, Well, maybe it’s a donation, because they were saying, Well, you can’t survive unless it’s a donation. Right. So well, you can have some amount of income on a service. So that was all that was challenging for us. So that was grey area. Also, we tried to apply for grants. But there really is, there are no grants out there for anything, cultural exchange anything, there was a 130 $1,000 grant total, but we were already making, you know, 100 1,000,002 million a year. So it was a drop in the bucket didn’t really matter. It wasn’t worth going after. So it ultimately were helped that we were very much helped in surviving off the donation of people’s time and passers by people all over the world, couchsurfing. We’re all doing this together that are absolutely where we’re able to get actual donations. That’s a good question. Technically, I guess not. And that’s why one of the reasons why it one of them, that model wouldn’t work so well. But we’re definitely getting people time and energy donated, which was the most important.
Erasmus Elsner 12:01
What’s interesting is that it really reminds me of the open source software community, which you have a lot of foundations right, the purely survive on donations. And then you have the commercial open source software, where you have this commercial layer built. And I think as you were transitioning from the 501, C to a for profit B Corporation, you had to layer on top a commercial model, which you iterated on quite a bit, I think. And in the end, you ended up with this model, where you would actually charge the demand side, right? Airbnb later hijacked the narrative of the community and the entire sharing economy. And they obviously, they had this great model of telling the hosts that they’re charging them only 3%, while charging the guests 12%, totaling to take rate between 15 and 20%, how we’re thinking about the different models and the optimal way to to keep the community alive and being about sharing and providing the same experience that you started out with, but still having some business model around.
Casey Fenton 13:02
Yeah, oh, my god, that was always one of the most challenging questions is because if, like, imagine it, like as a spectrum of something, it’s like, if you have a spectrum of like, we charge nothing. And we just try to do it on, you know, a few donations to hold to make the server stay up or something, and everybody’s completely on volunteer time, then you have a certain level of quality and a certain kind of certain quality of how you’re able to help your members have the experience and have the impact in the world, which I would argue is probably lower. And then you know, there’s somewhere at the higher end where you have unlimited resources, and you could pay the best programmers and the best safety team people. And you know, you provide a very high level experience, because you can kind of pay to guarantee certain results. Yeah, and then there’s somewhere in the middle. And so we’re constantly saying, Well, no doubt we are operating down here at the at this one side of not very good quality of people complaining all the time, its servers going down, and everything’s slower, like, Oh, that’s not good. So we got, we need to have enough income to have a good enough quality where we’re not endangering people. And then people don’t have to wait 10 seconds, 30 seconds, even for the page to load each page. That was for quite a while that was happening. I was that was challenging. And then, you know, and then there’s up here and then people I think, are afraid that well, if you go too far over here, you’re gonna start generating profits and not just gonna be paying, you know, just for the thing to work but you’re gonna start generating profits or something, and then it’s going to be kind of twisted into some kind of capitalist just topia thing, right? Touching, never made enough money to ever even consider that I know that people have a lot of people’s fear. But it was really, we’ve always just been trying to make it work and survive. So people have tried different things, and kind of different people that are in charge at different times have ratcheted up and tried different, more extreme measures to make sure that it would be there for people I like to say that there for our grandchildren. I always want it to be there the backstage pass. So different people have different ideas about what that what Good Darren, we can argue that out. But certainly during the pandemic, the they decided that they needed to make sure that the company would survive. So they put in a paywall. Is that good or bad? Or I don’t know, if the company is still in here, I’m thankful for that. But I, you know, I don’t like, I’m not looking at the numbers on a day to day perspective. So it’s hard for me to say, as a
Erasmus Elsner 15:21
last point to couch surfing, as you were marketplace, in the end, you have this typical, you know, chicken and egg question, it might be a bit different in the case of couch surfing, because this marketplace is really, truly connecting, and every individual experience can provide so much more value to either the host or the guest. If you think about the dynamic, who were really like the champions, the people who really wanted to host people, or was it people who were once a guest, and then becoming a host, because they wanted to give back what were you know, the strongest voices?
Casey Fenton 15:53
Okay, a couple different questions there. But it’s kind of like, who are the heroes? I think I heard that one. I think I mean, everybody really coming together. It’s what it’s called synergistic satisfaction. Tristan Harris taught me that word recently. And I think it’s really that it’s like everybody brings one plus one plus one equals 10. Right? Is this we have this, this configuration, we all get more, we all get, you know, our lives upgraded. So I think everybody taking that risk, and believing and then seeing that, you know, hey, we have a safety systems or verification or Bouchy, whatever, does that make it safe? And you’re like, Okay, that makes it safe. But taking that leap, I think so everybody’s a hero for taking, taking the leap. I would also say that, you know, people, like you said, people look toward the hosts, and they open up their homes. And I think that’s amazing. And it’s really super important. And that’s, you know, it’s, it’s required, right, you got to have enough hosts. But it also I didn’t want to thank the surfers themselves, you know, it’s difficult, bringing your culture to somewhere else, going in beginning maybe in an uncomfortable setting, it’s not always comfortable and be positive and share who you are, and share your background. That takes a lot. So I would also have to thank the travellers a lot too. And then everybody who contributes to the local communities, of course, creating meetings and, and just making it like making a safe place for people to explore. It’s all everybody.
Erasmus Elsner 17:11
Yeah, for you, personally, this experience has really shaped you, you’re now a much richer person, I would say a on the verge like someone between introvert and extrovert. And last but not least, you’ve become a modern day philosopher, and you have this great slide deck on ego hacking and ego I think is such a such a big topic, especially in technology, many people raising these vanity rounds, people getting so much external validation from having investors believe in them. But you early on had this quality of taking your motivation, I think and gratitude from the guests, and from the users.
Casey Fenton 17:46
You know, throughout this journey, there’s been all these these challenges different times, and some of them have been, you know, maybe obvious what’s going on, but a lot of them have been kind of confusing. And so I’ve been trying to think, Well, why is it happening? Why does this person act like this to that person? Why is this person acting like this to me? What does it mean? You know, it’s easy to say yes, it’s them. It’s not me, it’s them or something, or they’re, there’s something wrong with them and reject them. But over time, I started to think, you know, I think it’s more of a dynamic, there’s a dynamic between people that’s causing this these challenges. Often, the more I started to study this over time, I could go into all the different ways in which it kind of came to this. But take a shortcut here, I started to think a lot about identity. And I started to think about feedback ratios and positive psychology, there’s this thing called feedback ratios, and you know how much positive I share with you and and how much negative and then how there’s a nice healthy ratio there kind of biologically human to human. And if you get outside of those that range, things get weird, you start having this downward spiral of negativity of tit for tat, kind of, you know, it’s almost a game dynamics, and you go to high, things become meaningless, and you don’t believe anybody anymore. So maybe there’s this healthy ratio for us to start thinking about, we become who we spend time with, you know, you become the five people you spend time with. And more recent research says, you become everybody you spend time with and who they are, they spend time with, and they spend time with kind of the average of all of these, these people and how much time and you spend with them start to think, wow, it’s like if people are having these feedback ratios together. And then there’s this other thing kind of called the ego ledger, where people are keeping track of the positive and negative that they’re experiencing with any person or something in the environment or group of people. If they get too much negative, they don’t feel good about it. If they get more positive, they have a thriving range. And so and then they get too much. That’s not good, either. So I started to think about, again, people’s interactions and feedback ratios. And at one point, I certainly think I think I have some insights here that might even Garner maybe talking about I’m worried that if I talk about this more and talk to more people about this, I’ll probably learn a lot about it. So I started speaking at tech conferences and other conferences around the world three years ago, about ego happening especially from the perspective of a like a founder or somebody working on trying to make change the world right the change the change makers of the world. You got it you don’t it’s not enough to just have the right plan, you need to be the right person, you need to be the somebody who can understand how you’re interacting with other people and how these people are either synergizing, or really just falling apart and, and kind of getting in being disruptive socially to each other. So tried to synergize all the different learnings and then have a big narrative through it. And then that works well enough for a lot of people wanting to hear about that sort of running a little mini kind of conferences. And then now my wife and I, excuse here are with me, Simone, we started writing a book a couple years ago, and we’re just about finished with this, like 300 pages we’re really proud of her for, for sticking to this. It’s been a hard one, I can’t imagine that this has been such a hard book to write so many different challenges to it. But we’re almost done. So
Erasmus Elsner 20:42
yeah, I heard you pre announced that book for a while. And I’ve been searching just before whether it’s out yet, but it’s not out yet. And what I like about the the ego hacking concept I in the beginning, I thought it was about, you know, having no ego. But that’s right, absolutely not what it is about it is about this understanding that people gravitate towards the positive feedback and retract from the negative feedback, but that you embrace suffering, and that you say, the meaning is between the ups and the downs. And I’ve built a couple of products for the Internet, I’ve been in the shitstorm of the internet. And I think it’s something that you have to learn to not let these things get too close to you. How much do you think is also related to actually running a huge global community.
Casey Fenton 21:27
So for me, being in the kind of, like you said, the shitstorm of couchsurfing, I mean, there’s so many challenges all the time. And so this person is like this person, this person is giving this person a bad reference. And now that person wants us to take it down, but we can’t because it can’t. And then now that person is mad at us, because now that now we’re there against couchsurfing or something, you know, you can just watch the the feedback ratio stuff play out perfectly on capturing references, somebody leaves somebody a negative reference, and then that person wants to leave. So to protect No, I’m gonna leave you a negative reference. And everybody says it’s the other person completely they, they are not wrong at all. And so eventually, we saw that with you know, you have to, everybody has to leave their reference and they can’t see the other reference, and then they get displayed. But before that, it was just so easy to see these tit for tat downward spirals, and then to feel some of that energy coming our way toward couchsurfing organisation itself. And so it was really a perfect pressure cooker to learn and get to be forced to learn about this stuff that I’m trying to figure out what is going on. But the idea of ego hacking is kind of like that we become what other people say we are. Or to put it another way we become what other people what we become what we think other people want us to be for social cohesion, like we have to we did, There’s that famous research done, where there’s a professor on stage and you know, all the all the people in the class, all the students are told by somebody else, when the professor is on one side of the stage, pay attention, look at them engage, when the professor is not on that side of the stage, just kind of look away, pretend like you’re just not engaged, right? By the end of the class, the professor is on that one side of engaged, they can’t move. It’s like, right, and just like on the edge of the stage, almost falling up, you know, there’s just kind of a literal example of we’re becoming the feedback loops, and where we get positive energy, where we get positive feedback and getting away from the negative with life. Right? And so it’s, it’s pretty, it’s a lot of that. And so how can and we’re being programmed everyday by these feedback loops, right? So how can we be aware of our programming, just figure out who we want to be right? Instead of the programming, we figure out? Who do I want to be programmed as? And then how do you get there? How do you get your friends to help programme you if they’re so powerful at programming, they have more power than we do even a programming ourselves often? How do we get there help to get there. So it’s all about helping you go hiking, it’s about instead of throwing away your ego, or it’s about having your ego to understand your ego, have some compassion for it. And then, you know, get your friends help to become who you’d like to be instead, if if there’s any changes you’d like to make.
Erasmus Elsner 23:48
I absolutely love that. And I gained quite a bit out of your, your slide deck there. And obviously, I’m looking forward to the book when it hits your shelves. Now let’s move on to the company you’re currently working on, which is up stock. And yeah, if you think of couchsurfing as sort of the the sharing of homes, then I think upstox can be described as the sharing of companies ownership, the sharing of company ownership. Yeah, exactly. If I think back to my days in corporate law and stock option plans, I know that you know, you have these interesting legal documentations. And it costs the startup, a fortune to come up with the first draft and then even for the legal people in these startups to understand what it’s all about. And then once it’s with the employees, then everybody’s confused. And nobody knows how much of the company they actually own.
Casey Fenton 24:36
This journey they’ve stock options are, are bad and RFQs are good or just kind of like we want to create alignment and the companies we’re building and the current systems broken started actually within couchsurfing, actually, after we did our Series A Series B as well. I started to notice this probably started notice before and maybe some of my prior companies and things companies I’ve been involved with advising, but it was you know, we we Got her SUSE, we moved to Salt. We moved everyone to Silicon Valley. And one of our lawyers was, I don’t know, one of the better lawyers around I thought it was great guy. And he worked for work. And he’d done some of Facebook’s equity systems, I guess. And he was Instagram dealmaker of the year for that billion dollar Instagram deal. And he had given us the stock option agreements are given to our workers and like, okay, best of Silicon Valley do even better outcomes, better work, people are going to be more committed to the actually the opposite happened. Because after we gave them the stock option agreements, they came back to me, you know, a few days later, a week later, and they said, Casey, is this like a scam? It’s kind of the the one I got from them. And, and I was like, Whoa, ya know, how could this be a scam? That’s the opposite of what we want to want to be happening. We want people to be feeling really respected and cared for. And, you know, we’re in it together. And they said, Yeah, it seems like we have to buy the equity. Why would we need to do that? Seems like we should just receive this equity. In fact, should I be able to see the SEC for me? Maybe I just want to see what is I just, it’s all this complete mumbo jumbo legal stuff in, you know, legal documents, why can’t I just kind of see it, and it’s gonna be really cool to make a, like a spreadsheet or something and show them what it is now went back to the lawyer eventually, like they can’t. But even before that, they say, Well, it seems like a scam, because you have to buy it for 10s of 1000s of dollars. And then if I don’t buy it, it disappears. But if I do buy it, and the company has worked out, then I’ve lost all that money. Like there’s all these ways, it’s just a trapdoors, and I’m never going to receive this equity. And it seems like now I know, it’s just a job, that you’re not actually offering me anything of value here. We’ve got our lawyer kind of frustrated, embarrassed, and he laughed. And, you know, maybe I don’t know if you’ve made money on Facebook and Instagram already or whatever. Just maybe he’s just a good guy, he levelled with me. And he basically got this, this idea that stock options are complex, lawyers love complexity, more billable hours. And he said that they’re, you know, up market, there are better systems, but they still cost a lot hundreds of 1000s of dollars. They’re called restricted stock units. Companies like Facebook, Google, everybody’s moved over, but it’s just kind of trickling down market, people can slowly start to afford it. There’s even and I talked about this, how can I make a dashboard, Google doc has something to share, show them what they have you know that? That would be? What if you wrote the wrong thing, I could sue you. So he’s just kind of dissuaded me from that. A few years later, I found a lawyer who gave me the strictest document documents, but $30,000 for the boilerplate, and I had to use those and why don’t we modify them a little bit with our lawyers. And we teach that to a Google spreadsheet where people can see that here’s the value of the company, here’s the value of the equity pool, here’s my slice of the equity. And here’s how it’s changing over time. Not really me people kind of the seeing is the believing it’s like a video game, you start seeing what it is going up into the right, you can believe in something you see that you can understand the formula for. But it’s hard to believe in a complex set of legal docs where you feel like I can’t really understand what’s going on. And I feel like a trapdoor. And I feel like if I really tried hard, I’m not going to get it I’d feel like a fool later. So completely different worlds, we were really a runway, but using the system because people could all believe and they could take less cash and get more equity I started using not just with our companies with my startup and other startups that use it, and then we ran in the same Bannister Founders Fund. And she put in a couple $100,000 to really make it a company we incorporated in Delaware, I came on full time on that project that was 2017, middle 2017 or so since then, we’ve just been tested with hundreds of companies trying to create this super cooperative situation where everybody can get a fair share and believe in it right,
Erasmus Elsner 28:25
talking about runway and you know, extending your runway by actually motivating early employees, your early believers. What’s the optimal sort of entry point for up stock? Is it a company at precede? Is it that seed is a Series A,
Casey Fenton 28:41
it’s surprisingly, you know, there might be there’s probably a kind of ideal customer moment for us where we max it, we lower our customer acquisition cost or CAC and increase their lifetime value. And there’s some, you know, realm that that would be true, we haven’t found exactly where that is, we have some pretty good ideas after testing this with over 100 companies. And now we have over 50 paying customers or so it’s really all over the place because it is such a massive upgrade. And it’s just become so obvious that the old system is old that it works so well, for people that are downloading the political debt market, that there’s a few workers, right workers can see their ownership and it costs 10 times less than stock options. That’s a win for people that are the same 50 100 workers, people can see their ownership and it costs less, but they don’t care so much about the fact that it costs less, they mostly care about the fact that it really motivates people, and they don’t have to do complex 490 valuations. Because with RSUs you don’t need that. Usually it’s the people you know, the the general counsel’s within the those companies or even lawyers that are now adopting upstox and helping their clients administer it, because when you can see what you have and simplify and then have all of these because not only can we deploy equity in like a four years, one year Cliff kind of way we can do backloaded equity kind of like Amazon does it so that you and then you can see it and your vesting schedule, but we also do Dynamic equity where you can set aside a pool. People can earn pool points as they’re known by, you know, time by quarterly bonuses or any kind of bonus, you want tasks, like let’s say you having a whole 100 ambassadors and you want to incentivize them all, and give them all a little bit of ownership or even customers, you want to give a lot of people a little bit of ownership or doing certain tasks, you can do that with our system. So you can even convert stock options into RFQs. Just in our flow.
Erasmus Elsner 30:26
I guess the reason why I’m asking is that what happens if you have a company that already has a pretty complex system in place? Do they have to natively switch over to your documentation? Or is it quite flexible, if
Casey Fenton 30:38
anything that they’ve already had, they can just keep running it the way they run it, or they can say, Okay, we’re going to stop investing on this, right. And, you know, because they can just say that we’re gonna stop testing here, anytime. And we’re going to start testing over here. So you could do that, you could also say, Well, we’re going to offer people the opportunity to convert their stock options within the flow of the onboarding in our system, it’s, I hereby surrender my X number of stock options and receive why or its use. So you can do that as well. So there’s, you know, various ways you can do it, whatever is appropriate for the company and culture.
Erasmus Elsner 31:08
And if you think about other software solutions in the market, and I think you’ve talked about this in the past that, for example, Carta, which is often used for legal documentations, how do you sort of link into, let’s say, Carta?
Casey Fenton 31:21
Yeah, so it’s pretty easy. So carta is more about the, you know, the cap, table, the investors, maybe keeping track of stock options, but not really keeping track of RSUs, you could have one line, I believe that you can say if a stock RSU table, or you can refer to some, you know, a bunch of RFQs, or something like that, but so Carta and those, there’s a whole bunch of software systems that are really about that they care about keeping track the gold standard of like your cap table or something like that. That’s a bit different from what we do, what we do, it overlaps with that a little bit. But what we do is we motivate workers, and that’s all we care about getting people to have some ownership, increasing the chances of survival of the company, I don’t think the cap table increases the chances of survival the company so much, I mean, it’s kind of a commodity. It’s important, super important. But what we want to do is we want people to really believe in their equity, and get their fair share, and try their best do the best work of their life. That’s why we exist create alignment to the company, and the workers, any kind of worker could be an employee, a contractor, and advisor, anybody right affiliate and an ambassador, once you have that synergy. That’s what really makes or breaks things, right? When you have people answering the phone, writing some computer code, and they’re just doing it and not much, but that much more care for that much, much longer trying to solve the problems a little bit that much harder. That’s exponential that adds up exponentially over the course of the year, night and day. For us. It’s what we’re also doing what is something that people don’t think about so much called plan communication, we’re communicating that the plan, that legal plan is a good one. And here’s how it works. And so people can intuitively understand it. And, and when you can show them in a dashboard. And you can, it’s like, you can show them some numbers and how it all works together, you’re showing instead of telling I mean, we show first and also tell about it, but most complained communication companies out there, they mostly just tell it, let’s have a video about alternative minimum tax and stock options. It’s not show so much. So we that’s where we really saw that’s the difference.
Erasmus Elsner 33:18
No, I think it makes absolute sense. If you’re a founder, you’re often thinking about, you know, all your assets being locked into this one company, right? founders and also early employees are notoriously under diversified in the sense that all their net worth or large portion is locked up in this company. And then if you don’t have any transparency, where that value is actually and even dreaming will become hard, right? So you have this way of actually not only doing the long term plans, because we are all humans, we need long term goals, but also short term motivation factors you can by way of linking it to certain goals and having like this equity kicker for a certain milestone, I think it’s pretty neat way that is currently completely under explored, I guess, what’s your experience?
Casey Fenton 34:00
Yeah, so so so far, what I’ve seen is companies are diverse, they like to do things in different ways. Some people like to have a dynamic pool, put everybody in the pool, everybody’s winning points. And then it becomes easier to you know, for like, contractors all over the world. We have like companies, 60 contractors and a few employees all over the world. And they’re creating an Airbnb kind of competitor for the islands like upscale stuff, cost them half or two thirds less to build it because they shared instead of going to the investors, they actually shared ownership with the workers to get 15 20% of their company, I think, to the workers, you know, that was a big game changer in there. We have another company that just getting acquired. And so that really changes the lives of people somewhere in the world country, you would expect it pretty exciting. You know, anything from like small mom and pop shops, up to now we’re onboarding companies, maybe 150 200 workers and we’re even talking to public companies that want this. They’re like, Oh, you could you can handle all of our Aesop’s. They’re like, well, we can handle it in this way. Sure. And so we’re looking at converting our docks a bit to handle that. I don’t know if we want to go that direction. It might be you know, not our wheelhouse. But it’s interesting that there’s an interest there. And I really
Erasmus Elsner 35:02
love that the OG of the sharing economy is bringing sharing to the cap table. As we’re running against the clock, I want to give you the opportunity to shout out where people can find out more about you about the projects you’re working on. So you
Casey Fenton 35:15
can find me at Casey fenton.com Little bit of info there, feel free to reach out there, you can also if you want to find out more about ego hacking, feel free to message me at Casey fencer.com We will have an ego hackers.com website up soon enough with the book that if you want to, to talk about it, get it as copies or whatever, like you know, you want to help test out the book maybe before we go to print, you could message me there we might need a couple of people to help out with that. But then also upstox of course go to up sto ck.io upstox.io and reach out they’re happy to talk with people I just want to do all day long mostly as talk with people about equity and you’re there Ciao challenges and I’m not a lawyer so I can’t really provide legal advice, but we have a lot of lawyers on our team and happy to help in any way
Erasmus Elsner 36:02
we can. Wonderful and I hope you’re doing the audible version of ego hacking with your own voice. It’ll take you 10 days but but I hope you’re taking the time to do it and I’ll definitely give it a listen