This Week on Republic #1: S-NFTs and Huddle

Welcome to the first edition of This Week on Republic! In this weekly newsletter, we cover updates to the Republic platform and dive deep into one of the crowdfunding offerings. As always, our reports are for educational purposes only. Please consult a Certified Financial Advisor before making any investment decisions.

Security NFTs (S-NFTs)

As explained in our first article Algo’s Republic, Republic securitizes assets as tokens on the Algorand blockchain. In this case, Republic and Opulous partnered to bring music royalties to the masses. S-NFTs disintermediate big record labels by connecting artists directly with their fans. S-NFTs allow artists to earn more money and fans to be directly linked to artists’ work. S-NFTs are held in Algorand Wallets. Royalties are paid in stablecoins (usually quarterly). This announcement is just the beginning. We predict that all manner of assets will be moved on-chain, including eventually Republic SAFEs (Simple Agreement for Future Equity).

OPUL, Opulous’ native coin, is available as an asset on Algorand’s blockchain. Seeing a layer two use case that could grow exponentially as more artists transition to S-NFTs makes us very bullish on Algorand and Republic’s future. These offerings enable creative sovereignty, the idea that an artist’s work should be owned by them. No more Taylor Swift losing her music rights to private equity. She could be the private equity issuer now.

Deep Dive: Huddle

Huddle, a creator-founder platform, is raising funds using crowd equity on Republic. Huddle describes itself as a “social marketplace.” Founders work with Huddle to build project-based teams. By connecting creators with founders, Huddle solves the talent search problem that many start-ups encounter. We like Huddle’s model for several reasons.

1. Huddle wins with every transaction. It receives cash and equity by linking top creators with top founders.

2. Huddle provides the flexibility for creators to hop project to project. Top creators may not want long-term contracts with one company. As they are inspired, they can provide their sweat equity for company equity. Huddle rides the gig economy wave.

3. Huddle saves founders time and effort. Plug and play teams of vetted individuals with demonstrated work portfolios on Huddle allows founders to scale faster and reduces human resource costs.

4. Huddle is based in Miami, a growing crypto and tech hub that supports entrepreneurs. Network effects should be significant.

All four of these points relate directly to creative sovereignty and the freelance economy. Own your time, own your creativity.

Use Case 1: The stay-at-home parent

Parenting is hard. Long, irregular days of tending to children, dropping them off at practice, and other family requirements are grueling. It can be challenging for stay-at-home parents to make money because their ability to work a standard job wains. Enter Huddle. You are a creative parent with graphic design experience. You have free time during the school day at irregular intervals, and you don’t want to drive to a workplace. Why not work through Huddle? Build pitch decks and other products for young start-ups looking for help. Earn some equity and cash to treat yourself. This is the future.

Use Case 2: The entrepreneur

You’re a 28-year-old with a big idea. You’ve raised some money, but you don’t want to spend it all building a long-term team. Instead, you want to iterate quickly on your business model and have the flexibility to pay as you go. You don’t have graphic design experience but need a logo and a great website to launch your product. Enter Huddle. There’s a stay at home parent out there who would love to work on your project, and I bet they do excellent work.

The Financials:

Any deep dive requires a look at the company’s SAFE Agreement and Form C. We pulled out some key facts for you to consider.

SAFE Agreement --

1. The valuation cap in this round of funding is $10 million. This valuation means that the company is valuing itself at $10 million. If you invested $1000 today, and the company sold in the future for $100 million, then depending on dilution, your shares would be worth as much as $10,000.

2. There is a lock-up clause. This clause means you cannot transfer this investment until the lock-up period ends if the company goes public. The length is to be determined and will be set if the company IPOs or does a direct share offering. A lock-up clause is standard and stops employees from dumping shares on an IPO, which looks terrible and harms the company’s ability to raise money.

Form C --

In 2020, Huddle had $244,050 in revenues. Its net income was -$52,777. We expect this with any start-up. The cash burn rate will usually be greater than the revenues for the first several years due to platform development costs before revenue growth kicks in.

Huddle has two products: Huddle Sprint and Huddle Team. Huddle Sprint provides quick turn, one-time support to a start-up for a specific project. Huddle Team provides an ongoing team that develops a longer-term relationship for a more comprehensive number of projects.

As of 1 August 2021, Huddle had “$637,311.52 in cash and cash equivalents, leaving the Company with approximately fourteen (~14) months of runway.” The runway is how much time the company can support itself with cash and equivalents on hand at the current burn rate (or money it spends monthly). As revenues increase, we expect the burn rate to increase because the company will invest in itself as it seeks to reach a net income of zero and then eventually a profit.

In its Form C, Huddle acknowledges the inherent risk in its business model. It is a young and unproven company. Like any investment, it can go to zero. That’s why doing your own research is essential.

Final Thoughts

Many companies in the tech space could eventually buy Huddle. We see the potential for Huddle to add value to Salesforce, Shopify, Facebook, and more. As it grows and the founders decide whether to keep the company or sell it, we believe a responsible exit should provide substantial profits to SAFE holders.

If you are bearish on Huddle, you can save your money for something else.

If you are bullish on Huddle, you can invest through Republic.

If you found this article helpful, consider tossing a coin to your analyst.

If not, tell us what we can do better at feedback@polybiussquare.com

I am not a financial advisor. This article is for educational purposes only. You should do your own independent research before making any investment decisions.

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