Featuring Harold Hughes who shared how he successfully bought Doodles, V1 Punks, CPG Genesis, and WoW with friends to turn profit using tools like Gnosis Safe and Prysm to “squad buy” NFTs. Recorded on May 30, 2022 for Crypto Packaged Goods Genius Call series.
Harold Hughes is the founder & CEO of Bandwagon, a South Carolina-based experience technology company. Under his leadership, Bandwagon has raised more than $3M in venture capital and successfully acquired IdealSeat, Inc. in 2020. Harold has had his ideas validated as a graduate of the Founder Institute Accelerator (and now serves as Director for their Austin chapter), one of the inaugural companies in Google for Startups Black Founders Exchange Program, and most recently, the inaugural cohort of the IBM Blockchain Accelerator in 2019.
Connect with Harold on Twitter https://twitter.com/OneBandwagonFan
Follow Club CPG at https://twitter.com/CPGCLUB
To learn move about Crypto Packages Goods, visit https://www.cryptopackagedgoods.com/
Harold Hughes (HH)
All right, so super excited to be here and all of you that are joining. I've got a little surprise that we will share towards the end. So hopefully that makes you all stick around. So to jump in, my name is Harold Hughes. I am a startup founder. I'm an angel investor, and I'm also a community builder. That last one is really important because it really highlights a part of what we're talking about here, where we're talking about fractional ownership and group buys and sharing things when you talk about group economics and buying as groups. And so my NFC journey started late 2020 when I started to learn a little bit more about digital art. I had always been trying to be educating myself about physical art, but learning more about digital art. I'm a startup founder that has been building on blockchain since 2017. So the tech always made sense to me, but I didn't quite understand how to apply it in a consumer realm. And that's when I started to learn about NFPs. Unfortunately, even when I had opportunities to buy Board apes and some of these amazing blue chip products, I wasn't able to get a product. I wasn't able to get in. And so for me, it was really important as my learning got farther along and as the prices of these blue chips went up, I was able to think through, how do we allow more folks to participate in this? And so last October, I wrote this first blog piece. It was part one of a couple of part series where we talked about fractional ownership is ownership. And that was really important for me. I started off with this concept, wait, people are actually buying JPEGs? And for context, it really wrapped around this idea that people are able to put their cash together to share in things to where you're able to buy. Go ahead, go ahead. I'm recording. Okay. Go upstairs. So sorry. I've got a kiddo who's involved here. And so it's really important for me to think through how we get involved by buying these things that in some cases become so expensive. So I'm going to stop screen sharing so I can talk a little bit. And then I'll share some of the tools that I've used, hopefully that keeps recording. Chris. So ultimately, as we look at who is involved in the NFC marketplace, I started to realize that a lot of the projects and products that are out there were built for early adopters, speculators and opportunists. Right. And so as I looked at my community, the black community, people of color, if you think about women and some of the folks who traditionally weren't in these spaces early, there was a big gap in the portfolios. The entities that they owned were significantly lower in value than some of the other folks. And so as these things became more evident and become more prominent, it was really important to make sure that we think through, well, how do we get our hands on them? And so in October of last year, that is when we did our first ever group buy. We bought one of the Damien Hirst pieces. It was called the Currency Collection, a 10,000 piece collection by notable artist Damien Hirst. I love the economics of this. I won't get too far down the hole on that one. Ultimately, the concept was these things were now what I bought for last July for $2,000. The price of them had gone up to twelve E, which this is back in the hey days of eat, folks. So this isn't today's eat. This is your Granddaddy's East prices. And so these things are expensive. One of the things we looked at was like, well, how do we get people on? And I know many of you who are on this are probably experiencing the same thing. You've got friends and family that you've been telling over and over and over again, get into this project, learn about this, learn about this, and they don't do it. And then when they want to get in, the thing is really expensive or it's priced out of their range. And so they're not able to participate. And so being able to look at group buys or squad buys or whatever you want to call them really allows people who aren't necessarily the earliest of adopters but still are interested in participating in these rising projects the ability to do so. And so I was able to not only write a little bit about my own journey and onboarding, and actually I'll share that blog post for anybody who wants to take a look at it. You'll be able to see the second part that's in there as well. But that's where we got started. So now we'll take a step and talk a little bit about the organizational challenges that exist in a group buy and how that first buy went in September and October of last year, the tools were not as good as they are today. And I'll talk a little bit about the tools we use today, but I'll talk a little bit about the friction that we had. So ultimately, in the beginning, we had to start off with trying to have a single wallet to hold the NFT. At the time, nosis is still a well known player and noses safe. And nosis Vault wasn't something you could actually connect to openSee to buy the NFT. Right. So we knew that we needed to still use Metamass for one of these more traditional wallets. And so we had a pool of strangers, relatively strangers, and some anonymous folks and some docs folks being able to think through, okay, in a trustless world, right? This is supposed to be Web three where we're trusting smart contracts. How do we pull this off? And that was a challenge. So Julia Lipton, myself, and several others got together and said, okay, let's put all of our money into a notesafe and basically guarantee that the person who funds the money, which in this case was me, can't run off with the piece. And so step by step, we actually found the piece. And actually, I'll go to that and show that. Next, we found the piece and decided that we were going to focus on buying the NFC as a group and then sharing it as far as reselling part of it to the community. And so this is where we went. So let me go back to sharing my screen. All right, Chrome. Okay, cool. All right, here we go. For those of you following along, it's not as simple as like, oh, I want to buy this NFT. And all of us throw our money into a wallet, and it just worked that way. It was not that simple. Hold on, kiddo. And so I was really thinking through, how do we go about getting all the money into one wallet so that we can pay for it? And so we put it on to nosis. Then from there, one of us had to have enough money to be able to use our MetaMask on Open Sea to be able to complete the transaction. So all of my money was tied up in this Damien Hirst piece, which, unfortunately for us, the price started to come down significantly, which is also a challenge we'll talk about as well. So we put all of our Ethan sinosis. I bought the Damien Hirst piece, and then we listed it on party bid so that more people can participate. So I will share that. It doesn't let me just switch. I have to stop and then start every time. Okay. All right, let's go to party bid. All right, so now we're on party bid. That sounds good to us. We had 78 people participate and won the party. That's pretty easy because no one else was really bidding against us. But the way that worked out was the piece that I bought. I listed on fractional art, and we'll talk a little bit about the complexities there. Davehaver E shout out to Dave created a party bid party which allows anyone to fractionally contribute to a group by. In this case, it's connected directly to fractional. Fractional is where I listed the piece. And you would allow anyone to contribute this pool. And so you had all of these different people submit. Unfortunately, some of the folks submitted after we won, which happens, right? Sometimes you want to bet on a winning horse. And so there are a lot of people whose eat wasn't necessarily able to be used, but we were able to do this group by originally. So once we did the group by, I was able to then liquidate my portion. I put, I think, 13 e, twelve point 28 e into the piece and got my money back. Everyone who contributed in the original party bid got their money back. And we made sure to make it a seamless experience to make sure everyone contributed twice. You bought the original piece and then you bought this one. So to make that super simple, we had 16 individuals who were some kind of know each other from Twitter, but each of us trusted each other enough to say no one's going to burn up their social capital by stealing this. And so let's all put this together to buy the piece originally. So we bought the piece originally off of openSee with MetaMask and then saved it in our Noses wallet and then listed it on fractional and then started a party bid for this and then had to go back to fractional. And I'm saying all those steps because they're very important to point out here. And so let's see if I can switch to fractional. And Chris, feel free to ask any questions that you have there, as I toggle here.
Chris Cantino (CC)
Well, the good thing is this was six months ago, and we've come such a long way in terms of the user experience and trying to you no longer have to use fractional and party bid and nosis and have a trustless state of like, Harold's running money. Now we have these tools that are making it so much more seamless. And so for everyone who's listing, we're going to get to those two.
HH
Exactly. So again, we finally have it fractionalized, and now it is listed. And so one of the good things about this I'll talk about pros and cons of each of these tools, notice is a great tool. But given a multi signature type of wallet, basically meaning that no one person had the authority to take all of the money out, you'd have to have, like serious collusion. And given the fact that we were all pretty relatively strangers, you didn't really have a high likelihood of that. And so that was one of the great things about nosis. The other thing that I liked about the party bid experience was that everyone was actually able to set their own reserve price, which is really interesting. So if you're looking at the screen right here, you'll actually see that I set my reserve price at 22.9%. And you're able to see everyone here changes their reserve prices. But ultimately the final price of the piece is based on who has the most voting power. So we created a governance token called our docs. And so our Dots were distributed based on the amount that you had contributed to the purchase of the piece. So many of the original people, you'll see that we all have about 500, 500, $500, because at that point, we were just trying to do this as an experiment. We wanted to create opportunities for the community to get involved with. And none of us were really trying to strongarm this. We want this to be a truly Democratic and flexible process. And so each of us is able to, using fractional, set our own reserve price. So I set my reserve price at 18 here, right? So hypothetically, someone could want to buy this piece for 18.5, and I would be ecstatic about it because I've set my price at 18. But due to the other members on the platform or in the group, our reserve price is 22.9%. That's one of the things that's kind of challenging in this is that there is no messaging. There is no thing that holds us all together. We literally were sharing this link on Twitter and people were able to contribute and participate that way. And so some of the things that make it super easy to participate also make this challenging because the idea of selling this, everyone has to be essentially close enough to the right number. And if one person who owns enough of the tokens decide to make the reserve price 50, that make it probably impossible for it to be sold. And so that's one of the things that's kind of challenging there. But to help alleviate that, I can actually go in and buy people's our Dots tokens and therefore buy more token power so that I'm able to vote. So that's one of the things that's also really unique. So right now, anybody who's listening can check out this. I'll share it here in the chat here. But that is where our fractional bias. I'll recap that one more time, and then we'll go on to what we learned from that process. So a group of us thought, man, this is a blue chip that many people should have got earlier but didn't know about it or maybe didn't understand the process, but some of us had exposure. And so we said, let's find a way for more folks to participate in this process and let's create a group by that group. By was meant so that people were able to contribute whatever amount of eat they wanted. Point one might have been the smallest contribution to our party bid at that point. We knew that we needed to set a reserve price. And so when you buy the transaction by the NFC, you go directly to fractional. Everyone must connect their wallet. If you all saw on the page, only 59% of the folks have actually set their price, which is tough, right? You think about voting, you think about Dow structures and all the things that go into setting these things and making sure communities participate. Participation rate is a challenge in this example because almost half of the people haven't taken that next step. And so given the number of steps here, that creates a lot of friction. So here's what we learned in the first by. We understood really quickly that we needed to probably find a collection that had more pieces that were trading faster. So the Damien Hirst piece, which I don't know how many of you are familiar with it or how many are owners, isn't trading that often or that fast. And that's primarily because majority of their pieces aren't an Open Sea, the largest secondary platform for NFPs. So that was one of the biggest mistakes that we made was understanding the fact that, damn, so many of the Hearst collection, a 10,000 piece collection, isn't listed on Open Sea. You would actually have to go on Henry.com or one of these other platforms. So we didn't think through exposure and visibility for the market. Second thing is making sure that we had a better communication system so that we can stay on top of voting, understanding, setting the right price as the price goes up and down. At the time, we're using discord, and not many people really joined it just because of comfort or lack of familiarity. And so now we have 78 people who are all lost in the wind, and we're hoping that they check back on fractional every now and then to assess not only the market performance of the Damien Hirst piece, but also what price makes the most sense. So definitely the second piece that I think that we learned was figuring out better communication tools. The third piece, I think, is making sure that you have a thesis that would have helped make this a lot more clear, because then we would have a pathway to continue to buy, which would have given us more opportunity to stay connected with each other. As an angel investor, I have a thesis. I invest in women, people of color, and black founders in the United States with a product in the market before Series B. Like that's my thesis. And so then I can know very quickly if something is outside of my thesis, not to spend time, but if it's in my thesis to evaluate it appropriately. And so have we taken the time to create a community thesis that would have really helped us navigate the things that I think we didn't do great in the first buy before I switch gears to talk a little bit about the next buys and we've done several of these. I want to stop there. Chris, how do you do questions and answers? And then I'll talk a little bit about how seamless the newer experiences.
CC
I think we could just jump into the newer stuff in the noses and prism and then making sure that we get through all the material and then open it up for some questions, too, and it will be more of like a view on it.
HH
Excellent. All right, so flash forward here. As I talked about a little bit, I've been in the Web three and the blockchain space for a while. And one of the things that I noticed was that there just weren't as many black people in the space as I thought there should be. And at the same time, of the black people that were in the space, I didn't know where they were. And so I partnered up with two of my good friends, Chandra Washington and Audrey Fuignier, after riding back from the Brexit party at Art Basel and said, we should create a black Web three community, like Full Stop Black Web Three Community. Now, mind you, all of us have been in CPG since the very beginning. And so we've seen how the communities come together from so many different backgrounds. And in a lot of cases, you'd open up the chat and there was no specific agenda. You're just learning and connecting and people offering to help each other. And there are so many opportunities to grow. And so we reached out to Chris and Jamie and talked to the team and said, we want to look at what CPG has done as a model, and we want to create that community specifically for black people who are entrepreneurs, creators, investors, community builders, and that's it. And so if you are a member of Blackout, and I'm sure some of you all are as Pop because we had louder spots. And I appreciate Pop and CPG for getting us that space. We have several people who were able to see, oh, very clearly, oh, these are things we learned and how we were able to get in there. So Black Hat and CPG really had a lot of the same DNA. We're very close. So as we started our community, one of the things that we focused on was helping people understand buying NFPs, as well as how do we help people learn and get more ETH in their wallet. And that comes from investments. So a group by makes perfect sense. And so we found a CPG. I think it was a fudge with a fudge spray and a tea, and it was sitting on the floor at eleven point 99. And so we quickly posted in the group chat, and I wrote up a thesis, essentially saying, hey, all one of the things that we love about squad buys or group buys is the fact that it lowers everyone's risk exposure, but it also allows us to target blue chips that were able to participate in. And so when taken back from the thesis conversation, one of the things we made sure to focus on was our thesis. Our thesis of that buy was to double our investment. So we knew very quickly we played at 11.9 that we wanted to sell it at 24. That was very straightforward. And so ultimately, when it came down to buying it, we had several people who wanted to participate, and there were new tools on the market. And so now I will share what that looks like with our friends over at Prism. So here we go. All right. Prism is let me see. It's already connected. Give me a second here. All right. So Prism is an amazing tool that I've used half a dozen times. Looks like more than that, depending on the wallets of the various buyers. And I'll walk through what that process looks like, not only from what we did, but then creating the whole thing. So this was our first squad buy. Ultimately, we targeted the NFC. So you have to go to openSee and grab the listing link. And so you add a proposal, for example, and then you say, okay, my proposal is to buy an NFT. And so you say, okay, I'm going to purchase NFC. You drop an Opencurl, which I'll grab R1 quick. Let's see. Opencpg floor. Yeah, it looks like we could run it back one on 12.5. Oh, red pills is 12.5. I might run it back for real. All right, so let's say we wanted to buy these red pills. So you dropped the link. I really love how seamless this is. So again, we're starting with NFTs that are listed on Open Sea. Big exposure. Great opportunity. It pulls in information like the name. It tells you the target price, which is the current list price of the NFC. You propose the purchase. Proposing to purchase doesn't use any gas. You're just signing transactions. So my metamass just popped up. And so now I've proposed that we buy this NFT. Right. So on the Prism platform, we already have members, and that member group is right here. There's a bunch of people here. And one of the things that you look at is the fact that anyone we only needed five people out of the 25, 20% had to approve buying it. But we also needed the 8th in our wallet to be able to purchase it. So here you click deposit. I would say I want to put in one 8th or whatever it is, and I could deposit it directly from my wallet or switch wallets if I wanted. So as people are coming in to be able to evaluate the proposal all in one spot, I could see the target price. The goal is 12.5. How much does the squad have in the wallet? Zero right now. And then the total percentage funded. And then from there, once we hit the funding goal, from there, all of the folks would be able to see the proposal, and the first five to approve it would decide that they want to vote and buy it. And that was it. Everything was contained here. But because we were using this alongside our community and blackout, all the communications happened there. So we created a dedicated Squad Bias challenge or a channel where, as I talked about with a thesis that said we want to invest in double our money. We are very clear on this piece vest double our money. And so when you go back to our I'm going to go back to our squad because we've already done this transaction. This is our group. So it's 25 people. We can always add more people to the group, which is always really cool. For cleanness. I tend to start new squads every single time we're buying a new NFT, primarily because you never know if someone needs to get out, if someone needs new liquidity, or maybe it's a piece that they're not super excited about. And so we're actually able to see when we bought our first NFC, who put in however much eat into the wallet. And it shows you their Squad equity. And so being able to give me 1 second, I'm dealing with a five year old that is going stir crazy. Here you go. Thank you. All right, so you're able to see the numbers. You're able to see the NFTs that are owned in this collection. I'll show you how that looks in another spot. And then your transactions. It will show every single person sending east and buying the transaction. So we bought the entity on April 7, and then we sold it for essentially on April 28. So 21 days later. And all of that was contained in this through a series of proposals. So at some point in time, some would say, hey, look, I know we wanted to double our money and sell it for 24, but I think that we could sell it for 23 or whatever. We ended up selling it for 24 point 69. But that's after the fees, we ended up with 22 Rapids. And so being able to say, hey, we should sell it right now at this price. That's just another proposal. So you would go over, I'm going to switch to another NFT of one that we actually still own. So we still own this world of women NFT we bought for. Let's see. Okay, so we paid 5.2 for it. The current floor of the collection is four point 16. If I wanted to say, hey, I think we should cut bait and save ourselves here. I could start a proposal and say we should sell sorry, not sell NFT to Squad. We should sell our NFT. Where was it? Oh, here it is. We should list our NFT. We'd select it, and we'd be able to set the price immediately. There. We set the duration. We'd be able to say, how quickly do we want to list? Or maybe we want to give it some time before it's listed and it's immediately listed again. All of this is contained. So instead of me having to go through all the steps that I went through, fractional, nosis, Excel spreadsheet and such, all of this is baked in here. And so we've been able to do it really successfully, having flipped a couple of these and doing really great return, all of them in under 30 days, which has actually been great. But the thing that I love most about it is that it's giving people exposure to collections that they normally wouldn't have access to. One of the things that happens when you have a fractional buy of an NFT collection, is that oftentimes collectors have an example, excuse me, have utility that the owners or the holders get. Well, that doesn't work well when you've got 25 or 50 people that actually are owners. And so we were able to make sure that for each of these, we have a certain contact that gets to participate in that community. So, for example, when we did the group by for CPG, we were able to find one of our members who talked to the Cantino and said, hey, can we create a way for this one person to be able to participate in CPG without giving that person the CPG entity, which is normally what you'd have to do? And in that case, Cantino is really accepting of it. And he decided to create a poem that allowed all the same permissions of the CPG Genesis Pass. And our member from our squad, by having put in like 00:25 E, was able to sit alongside people who had spent 27 east because that person was part of a larger group. And we love that because it gave a lot of opportunity for folks who may not have had it and if they did have it may not have had the opportunity to buy at that time. And so one of the things that I'll stop sharing, actually, let me show one more thing.
CC
I've got a question.
I was thinking one good point is that you might have proposed the squad, but you don't own it. Right. So if there's 25 people in there and only five signatures are required to make a transaction or list an NFP, those five people in the group, anybody can propose that listing. And as long as they hit that limit of five signatures, they can list it. And it's sort of like when you go about and by the way, you can set that number, it doesn't have to be five, it could be ten, it could be.
Yeah. But that's the cool part is because it's also like a double edged sword, because if you require, like 25 signatures, it'll probably never happen.
You want to meet the middle line of what's fair and also being able to get things done, too. So that's an important kind of quorum to have established with the group when you set the number of signatures.
HH
Exactly. Yeah. We had five out of 25 for the first one. And I have to go back in and delete these proposals. But in this case, we have five out of 18. We just did one. That was. What is the current one? There's one that's high. Oh, it's pop. So we bought a bunch of pop NFCs, actually. Where are we at? Here we go. We did a squad buy and have three pop NFCs. So here are all of our NFCs. So as a group, we have all of these NFCs that we bought as blackouts community, 36 people. To get anything done with this wallet, with this squad buy, you need nine signatures. So we went up to 25% for this. And so we have a strategy on how we're going to go about it. Many of you are familiar with the buying in groups of three, but here it is right here. Thesis or mission buy three pop entities, flip one at the cost of all three, which is about seven and a half or something like that. Eight. One to hold long term and then one to sell at an opportunistic point in this journey. And so we are buying and holding. And so our members are participating as well. They're popholders and they're in the chat right now and they're on this call right now. But for us, it was really important to make sure we thought through a thesis, writing out our mission for each of these and then being able to set up the voting mechanisms. What does it take to execute a transaction? What does it take to get a proposal through? How many people does it take? How long does that proposal take? And so Prism is the tool that we're using. I'm a huge fan of it. It's really seamless, as you all have seen, TPG and I think are some of the folks who participated in season one and season two of the Prism program, which essentially and I'll stop sharing here, Prism has basically made a token gated Squad buying platform which you must have an NFT to create it. So I think for the first one and Chris, you may have to correct me on this, but for the first CPG buy that we did, I might have had to ask you to create it. I can't remember. But that's really important that as you scale in the very beginning of this, as any company or any organization or whatever, you want to be able to make sure that you're having a little controlled audience. And so if you look on Open Sea and look at the Prism collection, you'll see they have like friends and family. And so once Chris connected me to the CEO there, I have a friends and family pass that allows me to create these. And so it's really important for us to make sure that we're just creating more opportunities for folks to participate in Squad buys in these group buying collections, not only because there's economic activity, but in some cases, you may just want to celebrate the collection or the artist and be part of their journey. One of my first ever collections was participating with Sir Sue in The Crypto Cookout when his whole goal was to try and figure out how to raise the floor on black crypto punks. And so the idea was really straightforward. The black crypto punks happen to be closest to the floor. Let's buy them and raise the price. And therefore raising the floor of that particular characteristic and so you can think through this whether you're thinking about, oh, we want to buy and make 60% return, but in some cases, you may want to buy from a mission based. And so I think that's what's really important is some of the things that we definitely learned. So we've gone about half an hour here. So Cantino I will stop here and we can do questions and answer or I can drop the prize. Now, what do you think?
CC
Let's do some questions before we surprise everybody.
And Mike, he's been tracking in the chat, so he can help surface questions. And also, if people do want to just raise their hand, they can request to speak as well. But I'll start with the first question that I saw, which was how do you distribute the funds afterwards? So say 25 E goes back into that Prism wallet. It doesn't automatically go into everybody's wallet. Right. So you have to then send a transaction that sends everybody the correct percentage according to how much equity they have in the squad.