# Seed Club Interview - Rainbow Token Sale (11AM w/ Seed Club)
## Diarized Transcript

**Speakers:**
- **Jess Sloss** - Host, Seed Club
- **Josh Cornelius** - Co-host, Seed Club
- **Mike Demarais** - Co-founder of Rainbow
- **Alex LaPrade** - CEO of Rainbow

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**Jess Sloss:**
All right, gentlemen. Well, very exciting exciting week. Every day seems to bring up a new little bit of news item that I think uh either makes it uh Well, easier, more complicated changes of dynamics on the ground around how to launch a token. Josh and I were talking in the intro here, just like the unique challenges of Well, I mean you guess a building been building for years, the metas have changed probably 17 times since then. You're trying to come up with it with a uh uh, you know, I think an ideological and an inspirational uh product and launch and token in an era where people are kind of questioning the underlying fundamentals and even using the word fundamental a lot more than I think they ever have in this space generally.

So I think we're excited to dive in.

And as you know, Mike, probably from your last time on the show with us, Josh is a huge uh rainbow user. He's a huge rainbow points getter. And so I'm intrigued to see how this lands today. He's like one of your core people here.

We've obviously been tracking this quite a bit.

So um I'm gonna let you lead this one, Josh, as I uh decide to to cough here a little bit.

**Josh Cornelius:**
Yeah, I mean I think the I do have the point. I think that like two big issues we're seeing with tokens today are one, I guess just ambiguity around token models and kind of you know value accrual to tokens, and the other one I think just Like the vast majority of tokens don't either have a believable growth story or people maybe just don't pay enough attention to to understand it. So we would love to start on that latter piece. So can you just kinda help help us understand the big opportunity that that you guys see with with rainbow going forward?

**Mike Demarais:**
Yeah. Well, I mean, listen, we got into this space and started Rainbow back in 2019. when really there were like three dApps, right? Like it was like maker DAO, radar relay, right? Like Spank chain. You know what I mean? There's like very little going on. But it was super obvious to us that this is the future and sort of that this is a better financial system, one that is sort of permissionless, open to everybody, um, global by default. And, you know, uh, I feel like really now is actually uh when all of that is coming to fruition, right? Like we're finally seeing uh the the like real uh sort of adoption and proliferation of stable coins. Where, you know, I think that with with that rise of stable coins, we're gonna be seeing a lot of more traditional Wall Street incumbents. sort of enter the space. And, you know, Rainbow, we really live this shit, right? Like sort of crypto is in our blood. Like we're sort of, you know, deeply crypto native, have sort of been deep in the trenches building. um as the whole space has evolved for many years. And we just think that, yeah, like we're we're we think we're very well positioned to beat Wall Street at uh at like, you know, the race to basically build these these ultimate on-chain financial experiences.

**Josh Cornelius:**
Yeah, I mean how how do you guys think about the I guess differentiation or positioning of the rainbow wallet today? I think when when I started using the product, it was just, you know, your your your options were basically MetaMask. And then you guys came out and it was just like so obviously more usable.

Like even just like whatever.

Every everything was better about it, right? So you kind of had this like huge user experience advantage at the time. I think with, you know, Phantom now, Farcaster Wallet, you know, BaseApp coming, like the competitive environment looks very different and no longer is just kind of you know, baseline usability uh in obvious differentiator. So I'm curious how you think about kind of the competitive landscape and what makes you guys think of that.

**Mike Demarais:**
I mean I think you know Compared to some of those products that you listed, you know, I think that a number of those have really sort of leaned into a specific specialization, right? And um with Rainbow though, what we're looking to do is uh you know, build directly into the product like, you know, first party ex you know, like native experiences, right? Around these core primitives, things like you know, recently perks and today we're launching our test flight for um our polymarket prediction market integration, right? So the goal is to basically directly integrate into the product. um the ability to sort of jump in and out of any of these diverse um protocols and and sort of, you know, again, historically There's been friction in doing that, right? Like there you you need to have gas in your wallet. You have to have, you know, gas on the right chain in your wallet and things like that. And um, you know uh Something that you'll see in the in the polymarket integration that we're shipping today is um sort of it we've created a gasless experience, right? Um and and expect more of that to come from Rainbow as we continue to sort of further abstract the differences uh between these layer two networks and um you know sort of yeah smooth out some of the some of that that that friction that sort of causes, you know, questions for newcomers when getting into the space, right? Like uh trying to create a more gasless experience, things like that.

**Alex LaPrade:**
I think to add up that all those products are sort of crypto wallets today. And we've if we believe that all of Science is moving on-chain, really the products we're looking at are Robinhood and Cash App and Revolut. And can we build better and better on-chain experiences than they than they can afford them themselves and the other thing?

**Mike Demarais:**
Like I do think that like you know, sorry to just jump back in, right? But it's like You know, fundamentally all of our the core beliefs that we had getting in, you know, founding Rainbow in the beginning are finally coming to fruition, right? It's like You know, if you're a regular person, uh, you know, if you look at your phone, you probably have like seven to ten financial apps, right? None of which are interoperable with each other. If you sort of, you know, if you're a college kid and you all of a sudden need to come up with a lump sum of cash to put down on like, you know, a deposit for an apartment or something, you now need to go collect your money from all of these different apps, wait for the you know, for the the settlement to clear, et cetera, right? With with crypto, all of that uh uh sort of goes away. You have one financial app where everything is interoperable with each other. So yeah, I think that like while other teams are sort of leaning into things like social, et cetera, we're going to be leaning into that, right? Like the all-in-one financial app.

**Jess Sloss:**
Yeah, it feels like the aggregation point uh opportunity is really at the wallet level, which I think is probably like the Corvette, or one way to say the core bet that you guys have made. Um and I think it's interesting to see across the board uh this this sort of game plan of okay, we have the distribution, we have a a user group, now the goal is to kind of vertically integrate or or sort of maybe Was that going hor horizontal given that you're partnering with everybody across these sort of um applications that are ultimately working? And you're your ability to kind of be that last mile represents an opportunity to charge fees on top of it. You know, we we talked to a bunch of the Solana uh ecosystem teams last week and a very similar strategy there, I think, is what Phantom's rolling out, right? What they I think they announced Calci last week as well. And so I think people all all recognizing this. And then so I think from like a uh an investor perspective, what I'm trying to do then is make a s get get a sense of where is the advantage at that level, right? Like and and so I guess maybe a a place before we can start diving into some more of the details and some the specific, very unique uh I think approaches you're taking to this token. Can you help us understand the scale of Rainbow today? how it's growing, et cetera. Like I I don't know what metrics you guys are using that you think sort of matter the most, but if you could kind of set the the the data backed uh playing field here so we have an understanding of of where you guys are at in that competition.

**Alex LaPrade:**
Yeah, so um right now Rainbow is at hundreds of thousands of monthly active users. Uh we do millions of trading volume every single day. Um in Over the course of this year, what was called Rainbow V2, we rebuilt a lot of the code base from the ground up. Josh, if you're a user, hopefully the product has gotten much better for you over the course of the year. But that foundation has now allowed us to ship one lunch revenue line every quarter. So last quarter was perps and hyperliquid, somewhere around sort of the 10 to 15 sort of top builder there. This quarter it's it's uh prediction markets and poly market, which is in a test flight here shortly today. in sort of would continue for us to just lay around national revenue lines uh each quarter for for the foreseeable future.

**Josh Cornelius:**
And what what what is what is like, you know, month over month. uh growth look like. And I'm interested in these. It seems like yeah, the core strategy you're running right right now is yeah, integrating these new kind of desirable products into into into the app, prediction markets, perps. I think you had a launch pad too. Like are those these big kind of acquisition events or those most more serving your kind of your core base?

**Alex LaPrade:**
Uh so I'd say it's a lot of people who are already on chain. And I think what we're focused on next is tokenized stocks. And I think it's an interesting one for everyone who's looking at it. Since you look at the size of the equities market, it's 219 larger than the entire crypto market today. If you look at the trading volume of all the large issuers, it's like very, very, very small.

**Jess Sloss:**
You're trying to figure out sort of one why is that, and then how do you move that trading volume on two setting for We're getting a little bit of uh your your very nice starch collar there hitting your microphone just as a heads up so we don't want to make your audio awful. Um yeah, interesting. Okay.

**Alex LaPrade:**
Yeah, I mean So I said Mike I'm just gonna talk about too many stocks.

**Mike Demarais:**
It's about too much like you know again like we see ourselves competing with sort of traditional Wall Street incumbents and these these these sort of general financial apps like like Robinhood and in uh Cash App and you know tokenized stocks like You know, on one hand, it it sort of might strike people as like, you know, that's diverging from from crypto. But fundamentally, like, again, the the core belief is like there's one financial app where all of your assets are interoperable, right? And we do think that there's actually quite uh uh a compelling story around tokenized stocks in particular um sort of you know again people aren't really running with this right yet but we're working behind the scenes to make this possible but you know to me there's a huge opportunity um to create an experience that allows users to um like my basically migrate uh stocks that they hold in their brokerage accounts, like two uh sort of on-chain tokenized stocks, right? Uh via an in-kind transfer, right? So basically there'd be like no tax implication there. And to me, that the the story there is like really sort of self-evident, right? Like all of a sudden if you can then So you can create like vaults, right? Where you can just borrow stables against uh uh your equities and then sort of just basically farm the staple. So it's like you you could easily create vaults that have a sort of out-of-the-box. much more compelling um sort of uh uh uh uh uh like you know like yield.

**Alex LaPrade:**
If you think about an employee at like a big tech company like like meta or alphabet or like Coinbase, huge part of their compass in RSUs. If you want to go and buy a house with that, you're typically having to sell it, sell it down, pay cap pains on it. versus if you're still along the stock. Other things that crypto and DeFi is very good at is borrow land. So you do an income transfer, it's not taxable. And then it's very, very easy and hopefully one or two taps. to then be able to borrow against a tokenized version of Ocean.

**Josh Cornelius:**
Do you guys see that's being a like a a winner take all market and you can have to go beat Phantom to the next wave of users? I think You know, we we've seen how sticky once you're on butter and onto a wallet and have your finances there. I think it's a very sticky experience and hard to get people to switch. So how do you think about that competition to the next wave of users?

**Mike Demarais:**
I don't think it's winner take all, but yeah, I mean I think that, you know, of all of the the sort of you know wallet-esque products that you've listed, I do really think that everyone's kind of leaning into different um specializations. And I think that really it's going to come down to sort of which one of those plays out correctly. You know, really we yeah, again, like we're really leaning into building the ultimate like on-chain Robinhood experience. And part of that is actually, I think, staying nimble and and effectively like trying to um, you know, sort of uh, you know, I keep saying on Twitter that like Gary Gensler has like lobotomized the industry, right? And that sort of there's so many teams out there who are very stuck. in the think you sort of the mindset from a few years ago. And um, you know, we are you know happy that we have very full fully intact brains and we're gonna be moving nimbly to take advantage of these things, right? But like uh, you know, for example, like, you know, I think that we're gonna be uh one of the first to market with with sort of you know, privacy and anonymity anonymity solutions built into the wallet, right? These are things that I think a lot of teams out there still consider like taboo, right? But it's like very obvious to us that, you know, with the proliferation and and and rise of stable coins. You're going to be using them in e-commerce. You're going to need uh sort of built-in privacy and anonymity solutions and things like this, right?

**Jess Sloss:**
So I think that our nimbleness and sort of our willingness to be aggressive is is the edge there Yeah, let's talk about I mean we should we'll definitely dive into the details here, but I I do like this sort of uh this mindset shift that I think a lot of early founders in crypto have had to go through over the last little while, and I think many are struggling. to make that shift. I'm curious. Um is that sort of like a a a state of mind? Is it is it like I'm I'm curious what you've even focused on as like the core intent here that's allowed you to update your priors quicker than others?

**Mike Demarais:**
Yeah, I mean that's a good question. Um LaPrade, do you have an immediate answer coming to mind? I mean really it's like I I'm just thinking back to like all of like all of the core inspirations, the things that got me excited and motivated when we founded Rainbow. All of those things are true now and happening like now, right? And I think it's so easy to just be stuck in the past. Um, but it really is, you know, a new frontier. Like we have sort of uh uh sort of effective deregulation we have sort of you know uh like the proliferation adoption of stable coins right I think that this is basically the best time to be building in crypto ever.

**Jess Sloss:**
Yeah, I feel like it's it I mean my guess is those that have been that able to have a product in the market where data was coming off of it and you're actually very focused on what people want to do. That ver versus sort of the theoretical, that that would be sort of my my high level. And I think you guys have been sort of clearly building for users rather than the you know anticipation of what maybe this hypothetical group of people will will sort of uh bring in or want. So it requires a balance, right?

**Mike Demarais:**
Because like the stuff that we're talking about with tokenized stocks, right? Like it's not like users are hound it, but it's like very clear to us that that's a good idea and sort of is gonna have uh sort of you know traction in the market even though if you look at the trading volumes of these tokenized stocks today, they're not all that hot, right? Um But it's like it's clear to us that there's uh Wow, we're seeing acquisitions, we're seeing all sorts of stuff that kind of shows that the smart money is is making a bet on this.

**Jess Sloss:**
And I would have put myself in like both stablecoins and tokenized stocks were things that were I found profoundly uninteresting until it became interesting. And and that there's like maybe the unlock that they bring didn't excite me as you know compared to like the thousand X I've been chasing on the meme coins. But When you think about the totality of its impact and the competitive dynamics that emerge around it, I think it becomes super interesting. And then of course we we ask stupid questions and learn more about how these businesses actually work. And then we go, oh, that's actually very interesting seeing sort of the volume on these things start to grow. Um okay, so I mean Josh, I want to turn it over to you to sort of lead this conversation of unpacking some of the design decisions these guys have done because again, I think you are the You are the target of many of these decisions and I'm curious to see where you've landed.

**Josh Cornelius:**
Yeah, I mean I think the I don't know if I I if I think about the the best tokens, you know, they're ones that have, you know, some easy to understand fundamental value, but also kind of a lot of growth opportunity in kind of the monetary premium they drive because of like their usefulness within a you know a product or a network. So I think maybe to start on kind of the the f fundamental kind of value piece. I think what you guys are doing with the class F shares, 20% of equity going to the Rainbow Foundation is is very cool. So we'd love you to maybe Talk through I guess the intention behind that, interested in what options you guys explored before landing on on this structure, and then we can get into details on on what it means specifically.

**Alex LaPrade:**
Sure. So I think if we think about almost every business, um, they're reinvesting back into growth.

**Mike Demarais:**
Your microphone.

**Alex LaPrade:**
Uh and typically And typically management teams will only start to return capital to their holders when they run out of ideas on growth either organically or inorganically in terms of buying companies. And that's typically done via dividends or via buybacks. I think unfortunately in crypto. Value cruel into a token based upon part regulatory, part other reasons. Buybacks have been sort of the primary mechanism for demonstrating value cruel. But from a capital allocation perspective, it's a very poor decision since there should be much higher rates of return on that capital back into your business, which hopefully we've gone over, rather than be returning it to holders. And so from our perspective, the question is, how do you let token holders sort of share in this reinvestment and share that same upside? The answer is sort of very obvious. You make the foundation the largest shareholder of the rainbow business. It's all right. So that's where the class that came from. New class of stock designed to be held by the foundation on behalf of on behalf of the.

**Jess Sloss:**
In calling it class F, you're suggesting that it is somehow novel from at from as a as a from a structure perspective? Um I'm not sure if I understand exactly what's going on there.

**Mike Demarais:**
LaPrade like invented this basically. Like this is a brand new structure that was was really like designed and pioneered by him.

**Alex LaPrade:**
So uh rainbow, like many companies incorporated in Delaware, Delaware has I think very good laws, very good precedent for a number of things. So is one where is compliant with Delaware law, including everything from um rights, shareholder rights, sort of et cetera, but then making sure that you can tax-free transfer it to a Cayman foundation and then sort of hold that in terms of where the number 20% came from. largely as much as possible without running into issues around beneficial owners or sort of it being a control.

**Josh Cornelius:**
So what what are the maybe like precise rights kind of attached to class F shares compared to other share classes?

**Alex LaPrade:**
Sure, I'd say it's non-voting. There is drag along. I think a lot of the customary sort of things that uh you would see. Uh again, it is held by the Rainbow Foundation. Separate separate entity, separate sort of board of directors, uh there. And say the typical sort of WebSco versus sort of foundation.

**Jess Sloss:**
So it's sort of sort of lady acts as a different perceptual floor, I guess, from token holders. Obviously, it's directly addressing like the most common complaint that we're seeing on the time like uh very timely I mean you probably every single week we're gonna see stuff like this, especially if the, you know, the the market continues. Yeah.

**Alex LaPrade:**
So I Yeah, I think one of the interesting questions though in the case of I guess I'd say Coinbase and Circle is can they even offer consideration to token holders? in terms of where it falls in terms of fiduciary duty. Is it just a leakage of shareholder value? And if even if they want to offer consideration to sharehold to token holders, are they going to get sued by their shareholders for doing that?

**Jess Sloss:**
And I think I think Coinbase is still being sued for their direct listing, which was God knows how many years ago, right? So yeah, the the litigations around this stuff are are big. So I guess when I saw that, I was like, cool. It very much sort of a uh is well timed and addresses a core issue. The flip side is like when you think about um token valuations, there's a lot of um, for better or worse, sort of imaginary thinking that people get into. And I would say that that in many ways is I think, you know, the imaginary thinking in pre-seed investing is that this person's gonna go build a trillion dollar company and it's not always the case. Um and so I think there's sort of like this this openness that comes from or that you want to maintain as far as whether that's growth or new markets you go after, etc. Um, and so while I see the 20 the sort of 20% going to the foundation as like a great from a protection perspective. I wonder if it also creates sort of like a a mark in some way on the valuation of the of this protocol. I'm curious how you sort of think about the the impact or or or like where where does this fit amongst the other sort of growth stories or value stories around the rainbow ecosystem?

**Alex LaPrade:**
Sure. So I I think um certainly I think one way to think about it in terms of st the terminal value of it is just sort of whatever you value the equity piece at. And but I think for a lot of the companies that Mike has rattled off in terms of Robin Hood Revolute Cash App that ultimately um those are the kinds of companies that we look up to, the kinds of users that we are fighting for as they move on-chain. But I think Let's say ultimately I think the Ben Graham quote around sort of in the short term market is is a voting machine, long term it's it's a weighing machine. And like the the focus is if we are building a good pro building a good product, we are sort of focused on users or focused on building a good durable business uh that should be reflected um over time.

**Josh Cornelius:**
How did you guys decide on the the hundred million dollar FDB to launch this at?

**Alex LaPrade:**
So I I think um one I think Rainbow's DNA has always been about being as inclusive as possible. And so worked a coin list on who's just there sort of like the the largest track program around distribution as well as sort of giving the class F shares seemed natural to work with them from a regulatory compliance um perspective and trying to find what is an attractive price um for their user base to be able to get it to get in ads. Headline number is 100 million sort of FTV. The implied sort of market cap of that at uh TGE uh is 18 million.

**Mike Demarais:**
Yeah, we just wanted to basically get as you know uh open the opportunity to as many people as possible, in particular sort of our users, which tend to be, you know, regular retail consumers.

**Jess Sloss:**
I mean, uh I I think one of the things that so many have sort of missed, especially since over the last while, because I feel like everybody who's been in crypto for the last 18 like The new blood coming in maybe isn't super uh there isn't a lot of new blood coming in. And, you know, I think we go back to the early promises of of crypto, this idea of uh I'm using a product, I'm earning exposure to it. that exposure at some point is going to transition into something that is actually has a price. And, you know, what for for folks that maybe weren't around for a Uniswap airdrop or any others, you you kind of didn't get that magical feeling and it seems like that hasn't been a focus over the last little while as buy and burns, etc. have kind of been like the dominant thing here. And so I I think it's easy for us to to overlook the simple magic of I get to use a product and that product is giving me some ownership in it. And I think, you know, if we come back, that that's my return to fundamentals. Come, you know, back to this this magical thing that internet money can do, which I think is lost in the tokenized stock discussion. It's lost in a lot of these buy and burn discussion, which is that these tokens are available globally. So you know, like to go get exposure to that or buy in early if you're not an accredit investor. And so there's still this this magic to uh to crypto. Um and so uh I guess Alongside this token sale, there is, I believe, a an airdrop component to it. And I think that has been maybe for me one of the biggest shifts I've had in thinking over the last little while is just how complicated it is to both you know, drive a value narrative of sort of equity-like or ownership-like tokens while also effectively managing an airdrop to people, which is essentially giving, you know, zero cost basis tokens to folks. How have you sort of balanced off those two dynamics in the strategy?

**Mike Demarais:**
I mean fundamentally, first of all, like we wouldn't be here today without our users. Like I think Rainbow historically, right, like we've really never done paid marketing, right? Like all of our growth has has been driven from user evangelism, right? People really like the product and and sort of share it with their friends or you know onboard their friends to Rainbow as as being you know their first wallet. So yeah, I mean to us it's sort of like Yeah, it just seemed like obvious. Like we we should be doing an airdrop and sort of including uh our users and the people who sort of contributed the most to rainbow success. Uh in the token.

**Alex LaPrade:**
But I think with that part of it is in terms of like token design, asking ourselves like what is a token that we'd want to hold ourselves in in uh in RPA. Or I guess sort of or actually else. Mike always makes fun of me. That's I say these weird finance terms like PA.

**Jess Sloss:**
He comes back to the collar shirt and and uh jack. I like dynamic. Mike is like yo man, I'm I'm out here in my pattern.

**Alex LaPrade:**
So I I think again, I think to your question about sort of the growth story is ultimately part of If you want to be on-chain Robinhood, if you want um to ultimately sort of control users' sort of funds by virtue of being a wallet, it's a different level of any professionalism and way we need to conduct ourselves, at least on part of it with that sort of um damage, the rainbow brain, the rainbow voice, the rainbow uh DNA. So I think from some design perspective, it's a what would we want to hold through the long term ourselves? And then I think is the way we're trying to conduct ourselves around things like voluntary disclosures around sort of IR is what would you want to see from a management team that's sort of ultimately managing money on our behalf?

**Josh Cornelius:**
Yeah, I was I was very excited to see your your investor relationship site. I think it's pretty pretty light today, but you can see where you're you're planning on going with it. And I think you guys are gonna be one of the first one of the first things up on it. We'd love to hear that. I mean interesting. I missed this.

**Mike Demarais:**
Cool.

**Josh Cornelius:**
No, it's awesome.

**Mike Demarais:**
rainbow. me.

**Josh Cornelius:**
I think what one of the things that has has pissed me off the most about recent token launches is teams will write eight pages on the mechanics. Of how of how this token is being launched and distributions, et cetera, et cetera. And just give you no understanding of the business they're running, the vision they're going after. Which is like the prerequisite for me caring about anything else. So I I think when I saw that and looks like you're gonna put some metrics up there and, you know, build out an FAQ, that's it's awesome to see. Um Yeah, I would love to better understand. I think, yeah, we've been I think pretty clear that in our eyes, like the bull case here is yeah, you have this, you know, kind of fundamental perceived floor value from it ha having equity linking, but ultimately has you know, monetary premium and kind of real utility that makes people want to you know hold it and and use it well beyond just you know the value of that that kind of underlying equity. So we'd love to I guess understand In the short term, how you're gonna integrate into the product and and maybe some kind of dreams for what that could look like longer term.

**Mike Demarais:**
Yeah, I mean so first uh you know what what's gonna sort of exist at launch is um an evolution of our previous like ETH rewards uh program. So it's gonna be Rainbow Rewards where basically as a user of Rainbow, you know, all of the actions that you take where Rainbow is sort of charging you a fee. Part of that fee uh actually goes and buys back the rainbow token off of the open market and distributes it back to you. Right. So basically just by using the product you end up becoming um you know in sort of uh yeah have like a stake in the business, right? Um beyond that, I mean, so there's a lot, you know, we're exploring a lot, and I think that we can sort of really deeply integrate the Rainbow Token into the product. The obvious thing, the sort of like low-hanging fruit, right, is creating sort of um like a staking system around uh that sort of that that that uh sort of uh correlates to to fee discounts.

**Josh Cornelius:**
Right. I I'm interested if there are are any like weirder things you guys are exploring here. If I think about you know app tokens, network tokens, I think this is really the the most exciting design space for them. I think what Zora's doing by like you know quoting all markets in Zora is a really you know novel example of this that works really well for you know for the business and product they're building. I'm curious if there's any any kind of weird integrations that you guys are exploring that you think is really kind of native to Rainbow

**Mike Demarais:**
There definitely are, but it's honestly, I don't, we don't want to get ahead of ourselves and sort of uh and sort of uh set any expectations there.

**Jess Sloss:**
Um

It it'd sort of be better to sort of talk about it when it does.

Yeah, like the delicate balance. I I mean I I would my sort of takeaway from this conversation so far is that this There's sort of like these pendulums that was that's playing very aggressively in crypto, right? And I think you know, ever before I would say it's all airdrops. Now it's like, oh, you should just sell all your tokens and not do any airdrops. The thing is coming through to me here is that, you know, the desire to continuously pull your users in deeper as as owners of this protocol is actually I don't know it's a bit of a a of a narrative violation for where we are in the market today. I think if you if we're like deep studyers of it and My takeaway really is like, oh, I think we've probably just gone too far on the uh on the on like that tokens as equity andor buyback and or you know at this sort of huge opportunity to Uh it b br turn every single one of your c of your users into an evangelizer of your product is actually pretty big. And I think it's Using fees to buy and distribute tokens is actually like maybe on a service of a kind of a boring one, but I actually think it's a pretty big Deal, I know God I've got Brian Flynn in my ear being like this is what this is the way how you distribute tokens all the time.

I'm like that motherfucker's probably right again.

Just always a little too early. So I I think maybe maybe the the intrigue here is more that you're just saying, hey, we have a pretty clear vision on how we go win here and we're gonna go design a token and a and a integrate that token into our product in a way that we think will help us win. And kind of fuck the weirdness for now. Like there's some pretty basic things just to go do very well.

**Mike Demarais:**
Yeah, I mean I think fuck the weirdness. I think really we're we're sort of hearkening back to, you know, our roots and sort of this with the rainbow token sort of this class F structuring really is like sort of the the original dream, right? Like, you know, when I was ideating about a potential rainbow token in 2019, right? It was something much closer to what we're doing now than any of the like meme coin or governance token uh sort of hand waving, right? Um so yeah, I mean it is sort of back to basics. Um, and now's the time, right? Like uh sort of Wall Street is is is is here. They're trying to eat our lunch, but we're gonna fucking beat them because they They're new to this, right? They don't this is not their uh their environment.

**Josh Cornelius:**
I'm interested to better understand what what motivates you guys. So Mike, you've been you've been on this journey for a while. Uh Like why why why are you still here? Why are you going after this huge opportunity? Like what what's driving?

**Mike Demarais:**
Yeah, I mean, you know, I always like to point to uh my co-founder Christian's story because it's just it's much more sort of perfect than mine, right? But You know, real uh fundamentally like uh I grew up on the internet. I'm an internet kid. I uh I sort of, you know, every everything I know who I am today, right, was really um sort of driven by permissionless access to the to the internet, right? And um it's it's obvious to me that sort of DeFi and sort of on-chain finance is just strictly better, right? It's it's dr it's way more inclusive, right? Um, you know, I used to make websites when I was like 12 or 13. uh uh and sort of you know make a couple bucks, right? Um, you know, but if if you, you know, uh for example, my co-founder Christian did that as well um when he was sort of like you know 13, 14. But he used to get his PayPal account like nuked all the time because they would find out that he's, you know, like a child, basically. And uh uh, you know, and and basically that to us is is is stupid, right? That's not the way it should be. Um, you know, if you sort of are a person in the world and have access to the internet, you should be able to send and receive money um sort of on equal terms to everybody else, no matter where you live, sort of no matter what your background is. So really, yes, it's like the permissionless permissionless finance really is like uh the thing that motivates me for sure. Internet kids. I'm gonna get off into I I mean I'm a I'm a pretty old internet kid at this point, guys.

**Jess Sloss:**
I don't know if you can tell, but I'm actually like 33, so Oh, you're so old, Mike. Oh my god. Oh my god. If you look look at this. This is look at this. Look at this. This is your beard is impressive.

**Mike Demarais:**
Yeah, well I guess.

**Jess Sloss:**
I know we gotta get these hats, dude. We gotta get these on. Okay. I I I I feel like this has been a nice winding conversation. And I think these types of conversations are very useful because really people are are making a bet on on you guys. fundamentally here right and i i think you know behind all of these sort of uh questions around token rights and acquisitions all that sort of stuff is um really the sort of like the intentions and um ideologies of their founders fundamentally. I think that's plays a big role, at least in in thinking about how and where I want to be. putting my money under holding tokens. So I think this has been good. But I also think that there's um some specifics that we should probably get into here. Uh because I think the sale is it kicking off today? Did it kick off already? Like let let's land the basics. What what If people are excited about what Rainbow is is is up to, how do we get in? What is the best way for us to do that?

**Mike Demarais:**
Yeah, so I mean if you're a rainbow user today, you've been earning rainbow points, uh, which will sort of uh you know get you the airdrop. We have the uh coinless presale. uh which is live uh until Thursday, this Thursday, December 18th. Um, which uh that pre-sale is open and accessible to everybody in the world. Uh however there is sort of a special like link for Americans and then there's a link for everybody else. And you can find those on, you know, my Twitter, Rainbow's Twitter, etc. Um, and then today we also announced uh the final like locked in date. for the actual rainbow token like TGE and Airdrop, which is going to be February 5th. Uh uh, which yeah, we're quite excited about.

**Jess Sloss:**
So yeah, that's I love it. So FTV of uh 100 million on coin list here, a 33% discount to the last private round. There's about 100% unlock on one year after TGE. So maybe we should talk about that. I think there's been a lot of debate around lockups and should you have lockups? You shouldn't have lockups. I think. Uh pre-sale buyers here are gonna be locked up for a year, I believe.

**Alex LaPrade:**
Only Americans. Yeah.

**Jess Sloss:**
Okay.

**Alex LaPrade:**
Only US.

**Jess Sloss:**
Okay.

**Alex LaPrade:**
Take it's in the rainbow DNA, obviously make a subscriber to be as inclusive as possible. Most um pre-sales will sort of not allow US users in um and just only be sort of non-US. So if you've said the US, it's unlocked at TGE. Okay.

**Jess Sloss:**
If you are in the US, uh And I believe the team is locked up for four years and venture investors locked up for two years, all of which have a cliff. associated with them, I believe, of as one year.

**Alex LaPrade:**
So I'm not sure with uh investing starting at the date of TGE. So even though sort of Mike and his co-founders founded the business in 2019 Uh investing on their tokens is not starting to PG.

**Jess Sloss:**
Long term aligned. Let's go. Um beautiful token unlock schedule here. Yeah, I think you guys have done a great job in in communicating this. I'm on the coin list site right now and I think it gets into all the details there. So that means you have two days. Two more days to participate if you're uh looking to be a pre-sale purchaser here.

**Josh Cornelius:**
Do we have some do we have some numbers on how the sale's going so far?

**Alex LaPrade:**
So I think overall sales going very well. I think our biggest concern is just there's a number of people who have issues with KYC. If you're having issues, please message Mike, please message me. Uh to help make sure that sort of you get your paperwork uh in your own.

**Jess Sloss:**
Like we we clearly this is the next big opportunity. I know it's it's sort of like Such a uh it reminds me of airport security, right? Where it's kind of it's theater that makes us feel more comfortable. I don't know if KYC makes us feel more comfortable, but good God is it. It's painful.

**Mike Demarais:**
I think that, you know, um, you know, coin lists themselves and the wider sort of industry is sort of uh evolving and and sort of becoming more on-chain. The timing here though, uh sort of it just needed to happen this way. There really wasn't another option.

**Jess Sloss:**
I mean, I think people underestimate the the risks that these foundations and projects take on if you take some um banned money in some way. Like there there could be no no worse thing. Many, you know, you think about all the securities laws, that's cool. They are far less uh aggressive than if you're taking in money from Hamas or somebody like that. So Kinda kind of important. It's it's bullish that you guys are doing KYC, unfortunately. Um okay, so what happens between uh the 18th and the s the fifth?

**Alex LaPrade:**
Sure. So I think it's important for us to complete the class F transaction as well as uh give all the customary parties uh the chance to sort of look at it, exchanges sort of et cetera, and wanted to have a date that we can stand behind and uh commit to and be held accountable.

**Jess Sloss:**
And are should we expect these to come out in a in a pretty broadly available way? Like are are we are we talking centralized exchanges, et cetera? Okay. Yes. Can we ask how those question conversations are going? I think there's a lot of uh open questions around sort of the the pricing power centralized exchanges have versus the quality, credibility, excitedness of the project. So

**Alex LaPrade:**
So th this this it's tricky in terms of it gets into our where we want to stay now on the IR front, in terms of like uh material amount public information. I guess the easiest way to say it is like we are talking to every single um exchange who are all sort of very excited. Um I think doing my diligence especially around just a better understanding the class app structure.

**Jess Sloss:**
Fair answer. I know why you brought the suit now, Mike, because I'd probably get you to give me all the details there, but Alex's suit is like Yeah, we're a good yin and yin. Yeah, I can feel it. Yeah. Um You got any more? I mean so Josh, I'm I'm just curious. And uh we should let you guys go because I know you guys have a lot of else going on.

But I love this.

I am curious, Josh, just like your take get out of your sort of interview seat here right now and just think about as a as a token buyer, a user of this product. Can you grade these guys on on how well they sort of map to your desires? Yeah, I mean I think there's a there's a ton I love about it.

**Josh Cornelius:**
I think the the hard part with TGEs is always just Especially when, you know, airdrops, $100 million FDB is just, you know, I I'm definitely sitting in this seat where like I want I want to be along for this ride. I've been a long you know multi-year user of Rainbow. It's my my my mobile wallet and I think and will continue to be. Definitely want skin in the game here. The question always comes down to, you know, do i do I just wait a bit? Right? And I think the You know, airdrop market conditions, a hundred million dollar FDV just kind of puts puts those questions in the head.

**Jess Sloss:**
So uh that FDV so I'm curious what Uh because I think there's sort of like the FDV and then there's the market cap that's coming out here, right?

**Mike Demarais:**
Which is you know the vast majority of the This was sort of like, you know, those numbers were chosen for the The pre-sale, right? With the idea of sort of making it more inclusive for the community.

**Jess Sloss:**
Right. So because if you're coming out at uh most of these tokens are going to be on market, you actually have a fairly low float that's coming out. That float is going to be in the hands of users and some early investors. I think it's interesting.

**Alex LaPrade:**
So investors and nothing is hitting the market.

**Jess Sloss:**
Sorry, pre-bad I would I would consider ICL purchasers here in that bucket. But yeah, you're right. I should. It should use your your taxonomy here.

**Alex LaPrade:**
There's a large amount to the Treasury, and hopefully in terms of it, it's it's come across in terms of how we carry ourselves and we think about capital allocation in terms of trying to grow things on a per share or sort of per token basis. And so I think if there are opportunities to uh to do MA and there are things that are high conviction that we think are going to be very creative to um due to motors. On a perturbate basis like yes, you aggressively pursue those and sort of fight to get those deals done if we believe that it is best for

**Jess Sloss:**
token owners in terms of things like emissions um or things like that sort of we're not expect the treasury to be active actively used yeah that line did stand out to me treasury is intended to be used for high conviction investments brackets such as MA that should be accretive on a per token basis Again, this is another one of those promises that I feel like we've continued to sort of under deliver on is like we have tokens as balance sheet expansion technology. And yet, and I think clearly where you guys are fit in that stack, it's it's really not hard to imagine a multitude of different types of products that could could really, you know, you could bring in that would allow you to either expand your sort of Your take rate on these sort of things or or unlock new use you know, new types of features are pretty effortlessly. Um Do you guys have targets in mind already? I know you won't answer which, but like is this part of regular conversation where you sort of see opportunities and part of the sales actually unlocking this sort of MA movement that that could be very valuable here?

**Alex LaPrade:**
I'd say we see a ton of inbound. I would say I think if we had our preference, it would be all organic growth for the foreseeable future, just given how important UX is uh to rainbow as a product, sort of as as company oftentimes sort of when you start to reach on inorganic uh oftentimes the things you lower the bar on sort of ux and how tightly things are integrated how well they they work together So I'd say for for the foreseeable future, we'd ex would not expect sort of M any MA, but again if there is inbound and we believe that we are being offered a dollar for 75 cents. And it's that season, I think, really.

**Jess Sloss:**
Um I guess the other question is What is having a token live unlock for you from like a growth motion that you can't do with sort of the points or pre-token?

**Alex LaPrade:**
So I think there's the sort of point store as a proxy for token, I think, is the experience that Mike has described around sort of real-time rainbow and cash back. um that is always preferable to uh to points but also just you are they're playing a different game a different level of scrutiny both positively and negatively and you have a a live token uh in market

**Jess Sloss:**
Very true story.

**Josh Cornelius:**
Nice.

**Jess Sloss:**
No, I don't think so.

**Josh Cornelius:**
I mean you guys have been very generous with your time. I think awesome to see you guys. you know, iterate and bring a new kind of you know token equity linking structure to market. I think we are in dire need of more experimentation and you know, people holding crypto ideology at their at their core and and yeah, putting putting the legal documents where where their mouth is. So love to love to see this. I think Yeah. I mean Josh, you had a you had a good tweet.

**Jess Sloss:**
You said uh crypto isn't institutionalizing, institutions are crypto-izing. Oh wow, nicely done.

**Josh Cornelius:**
I mean that that was my that was my experience from Breakpoint last week. Really was like You know, seeing talk you know, talk at all these projects who have, you know, m product market fit within crypto are leading categories. They're not like It seems like less like we're bending towards the needs of the institutions and more like the institutions are seeing a huge opportunity to come and and bend to the desires of crypto and get get brand awareness almost from from partnering with in crypto. And I think that's that's the most bullish thing I've I've seen.

**Mike Demarais:**
It's a good time to be building in crypto. Yeah. You know, I think that yeah, I mean like sort of uh the institutions You know, they're thirsty uh and they don't really know how to do this stuff. They don't understand it. Um, we're well, we're quite well positioned.

**Jess Sloss:**
Yeah, I'm stoked. I'm stoked that you guys are uh I mean I think you sort of captured a really unique angle of crypto from the early days, and it's it's no small task to be able to continue to push that over many years. Um, and I think, you know, TGEs are sort of this weird thing where your entire life is kind of built around getting to that point and then Then really the hard work starts. Um and so I think uh as Josh and I always say I think crypto is is is clearly talent constrained. Um, and I definitely don't think that's the risk here. So excited for you guys just to I I would just wish this is a huge success and and that you can kind of thread this needle between pre-sale, airdrop. product that makes money with huge opportunity in front of it. Um, I think these are the types of thing it as I sort of think about where where the biggest opportunity in the market is right now, I think it is just kind of a comeback to basics and clearly articulate the magic of crypto. Because that hasn't changed. It's just been maybe diffused a little bit or or distracted by some, you know, some shiny objects. But if we get right back to the basics here, where else can you still get exposure to a growth asset at an early stage without you know being an accredited investor in a with the network in Silicon Valley. Like this is still, there's still a huge delta between what pre-seed or seed early stage tech is like in the traditional startup world and and what's available in in crypto. And I think it's our opportunity to kind of make that very clear. And I think you guys are on a a good path to supporting that as well.

**Mike Demarais:**
Permissionless finance is good, guys. What? What a concept. This was a unbelievably refreshing conversation.

**Jess Sloss:**
Thanks for having us and asking us all of these Uh great questions. Well, we wish you the best. Uh two more days to participate in the Coinless Sale. Uh go to Rainbow.

**Josh Cornelius:**
Oh, we lost Jess. You muted yourself.

**Jess Sloss:**
How did I do that? That's fun. I haven't done that in a long time. That'd be terrifying, dude. Just get some high frequency trader hacking me here a little bit. Okay, so rainbow. me. I mean there, these guys' Twitter account is is uh uh by far the best place to follow like the the machinations on a daily basis here. Love the memes, love the characters you guys have built. You can also go to coinlist. co slash rainbow um and you can see the the token sale there. Two more days for that. Gents wish you uh huge success in this and uh would love to sink back up in early February as we approach TGE.

**Mike Demarais:**
Guys, love the show. Thanks for having us on. Yeah, absolutely love everything you guys are doing. This is like the coolest show.

**Jess Sloss:**
I mean, we just, I think, share the point of view that you guys have as well. Like this is just It's still early days and the market is huge. Permissionless finance is is a big deal.

And uh we just love crypto.

Yeah, that's the truth. All right guys, we'll let you get back to it. Thanks so much. Peace.

**Mike Demarais:**
Timeline's bipolar.

**Jess Sloss:**
Yeah, that's the truth. All right guys, we'll let you get back to it. Thanks so much. Peace.