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Investing In Memories, Not Material

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Cézanne Britain is the founder and CEO of Britain Renecke, a 100% black, female-owned commercial law firm in South Africa. Her tips for a debt-free life and why she counts memories, not money.

What is your investment philosophy?

I tend to have a conservative investment philosophy that is long-term orientated rather than short-term focussed. While I believe in doing research, I am also guided by my gut feel when making investment decisions.

What advice you would give anyone who wants to invest?

I take a very conservative and long-term view on investments. From a very young age, my focus has been to save as much as you possibly can of your salary and to try and be debt-free as soon as you can. And if you can steer away from short-term credit like credit cards and short-term loans from the get go in your career, that’s probably a good thing. You are going to need to build up your credit but make sure that, for example, if you spend money on your credit card, settle the full amount at the end of the month. Don’t let it draw interest.

What is the most interesting investment decision you ever made?

When my husband and I got married, we didn’t buy wedding rings. We didn’t buy bedroom suites. We spent our money on travel. After the first financial year of business, I wanted to give my husband something to show him and thank him for all his support and I bought him a wedding band and that was two and a half years ago. And it was quality but it didn’t cost a fortune.

READ MORE: Fashion, Fame and Finances With SA Designer, David Tlale

What was your first big investment?

Buying my first apartment. I have generally invested in immovable property and shares and my education. Of the three, I paid for my own education and worked five jobs a year. Because I didn’t want to have debt when I started this [company] when I was 18 years old. It meant five jobs a year but it meant I graduated without a loan. There were lots of bruises along the way. But I was debt-free. The second thing I had on my list was to buy property. I then bought a bachelors apartment when I finished my articles…I was going on 23.

What lessons have you carried with you since your childhood?

I was fortunate to have parents who taught me the value of discipline, responsibility and hard work from a young age. I think most important of all, have a dream and vision and a fierceness, fearlessness and resilience to succeed.

What is the most expensive item you have?

I don’t tend to collect material things. I tend to spend money on traveling and making memories. Four years ago, I took my mom to Mauritius for the first time. I wanted her to experience what I experience. We spend our money on giving people experiences and giving ourselves experiences because memories last a lifetime. When I talk about long-term investment, I also talk about memories lasting a lifetime. You can’t get those back.

The most expensive trip you have ever taken?

A trip around the world seven years ago.

How do you describe your leadership style?

I learned a long time ago we have to use our power responsibly. I don’t have one type of leadership style, but rather a combination of autocratic, transformational, coaching and visionary leadership.

Economy

Deals, Dollars and Developments On The African Continent

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The first-ever Africa Investment Forum was a resounding success with some fascinating math: 49 projects worth $38.7 billion over three days, all for the continent.


On a breezy Wednesday morning in November in Johannesburg, there is a feverish bustle at the Sandton Convention Centre, one of South Africa’s most prestigious destinations for conferences. Known for regularly hosting world-class exhibitions and events, today, it is playing host to one of the most important events of the year.

The second floor of the convention center is pulsating with action and excitement as hundreds of businessmen and power women in sharp suits and African attire greet each other. At each corner of the grand room are huge posters with quotes that say, “People don’t eat potential! It’s time to turn potential into real deals,” and,

We believe that the growth of Africa’s economy represents opportunities for its neighbors

The word on everyone’s lips is transactions. The inaugural edition of the Africa Investment Forum (AIF), organized by the African Development Bank (AfDB), is officially opened by South African President Cyril Ramaphosa.

The bigwigs of corporate Africa and political power brokers are all here, including Africa’s richest man, Aliko Dangote, along with Nigerian Vice President Yemi Osinbajo, Ghanaian President Nana Akufo-Addo and Ethiopia’s first female president Sahle-Work Zewde.

The AfDB describes the forum as a collaborative platform for the economic and social development of the continent. The goal is to bring together project sponsors, borrowers, lenders and public and private sector investments to unlock billions of dollars that will accelerate investment.
The rationale is simple. Six of the 10 fastest-growing economies are in Africa, yet Africa has a mammoth infrastructure funding gap of $130-$170 billion a year.

The man called ‘Mr. Development’ in the October 2018 issue of FORBES AFRICA, AfDB President Akinwumi Adesina, believes there needs to be a convergence of stakeholders from all over Africa to broker deals that finally unlock the potential of Africa.

As with any conference with a multitude of minds, opinions are divided for this one too. On the one hand are those who quietly wonder whether this is going to be yet another three days of rhetoric and ambiguous targets that bear no fruit? Then you have those believers who are convinced that Africa is ripe for an integrated marketplace that can actually deliver real growth.

For these people, the AIF offers new hope. They believe that the continent’s largest and smallest economies are ready to come together and take charge of their own destiny.

According to the World Bank, year-on-year economic growth in sub-Saharan Africa is slashed by two percentage points due to a lack of infrastructure. Analysts believe around $100 billion must be invested each year to eliminate the deficit and give African infrastructure a shot at competing with other developing regions.

Traditionally, the World Bank, the AfDB and African governments have sought to address the infrastructure gap by investing in larger infrastructure projects valued at more than $1 billion.

This means smaller-scale projects, in the $100 million to $200 million range, which are also necessary for the development goals of the continent, are neglected.

History shows that trade has the potential to transform nations.

Adesina believes this. 

“The AIF is probably the most important game-changing initiative for accelerated economic development in Africa. It is a unique platform for investment, finance, transparent transactions and a genuine African marketplace for closing deals to accelerate the economic development of Africa. The fact is that no individual benefactor, no matter how rich, or government or sovereign wealth fund, or even a multilateral development bank, for that matter, can provide the resources to meet Africa’s critical economic development needs,” he says in his opening address at the conference.

According to Adesina, the solution is clear. Africa can and Africa must collectively work towards financing its development, requiring broad partnerships with the private sector and an appreciation of the realities of global investment partners.

“This will be an African investment marketplace where the AfDB and its partners will screen and enhance bankable projects and attract co-investors and facilitate transactions to close Africa’s investment gaps. This platform will reduce intermediation costs and improve the quality of documentation and information and increase active and productive engagements between African governments and the private sector,” he says.

It is that type of collaboration that brings Shamima Mallam-Hassam, Country Executive of Alter Domus, all the way from Mauritius to Johannesburg.

“We are a leading fund and corporate services provider, headquartered in Luxemburg, with an office in Mauritius. The purpose of being at the Africa Investment Forum is to meet with people that have projects in Africa, that we can help in their structuring, and use Mauritius as a platform for their investment into Africa. So this is a very high-level forum, where a lot of insights have been shared about where Africa is going and how there can be more collaborations to make projects happen,” she says.

Ethiopia’s first female president Sahle- Zewde networking with delegates at the Africa Investment Forum. Picture: Gypseenia Lion

Can developing nations thrive in a global economy without an international, collective mind-set? International organizations like the United Nations Conference on Trade and Development (UNCTAD) believe that for sustainable development to exist, more developed African economies need to break down barriers between them and less developed economies. To begin with, the continent needs to address rising unemployment.

“We need to create 400 million jobs for 400 million Africans, who are already born, between now and 2030. These massive numbers need massive responses,” says Ibrahim Mayaki, CEO of the New Partnership for Africa’s Development (NEPAD) during a panel conversation at AIF.
A total of 49 deals were made at the AIF, which were valued at $38.7 billion, according to the final numbers released. These deals represent a renaissance for the African continent. But the concern for some is whether the returns from these deals will remain on the continent.

“The ownership of industrial assets must be African companies. A lot of developers make the mistake of allowing foreign ownership, which alters the trajectory of your destiny,” says Basil El-Baz, chairman and CEO of Egypt’s Carbon Holdings.

The all-important issue of women’s empowerment in corporate Africa is also discussed. A panel in ‘Investing in women for accelerated growth’ reveals women entrepreneurs experience a significant funding gap of $42 billion annually, but are more likely to repay loans compared to male borrowers. David Makhura, the premier of the Gauteng province where the conference is held, attests: “African women need to be supported. They are the ones that sell to provide for their children and families.”

The panel comprises prominent and successful women, including Ibukun Awosika, president of First Bank of Nigeria Limited, Hayat Sindi, senior advisor to the president of the Islamic Development Bank, and Daphne Mashile-Nkosi, chairperson of Kalagadi Manganese.

We need to make women a critical component of our financial system


Ibukun Awosika

Underpinning the market place is ‘The AIF Platform’, that connects 200,000 American businesses and users from 100 countries, many of whom are potential investors and trade partners for Africa.

The AIF Platform is announced in partnership with the Inter Development Bank (IDB) who launched a similar platform, Connect America, in 2014.
“We have over 400 million smartphones in Africa. Within a few years, this number will exceed a billion. But none of these are made in Africa. We are the consumers but we’re not the value creators,” says Ashish Thakkar, founder of Mara Group, before the closing plenary.

The AIF Platform was created to address exactly this. By connecting African-based companies like Mara to global trade partners, there can be economies of scale.

If there is one thing to take away from the conference, it is this: there is a fight to back Africa as an investable destination so that capital can land in the continent and unlock its potential. As Adesina puts it: “This is Africa’s time to change the rhetoric. We need to make Africa independent; we can no longer build Africa relying on aid. The only way to achieve this is a complete rise in intra-Africa trade.”

Africa’s richest man, Aliko Dangote attended the inaugural Africa Investment Forum. Picture: Gypseenia Lion

READ MORE | How Nigeria Can Attract And Keep The Right Kind Of Foreign Direct Investment

READ MORE | Offering The American Dream To African Investors

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How Nigeria Can Attract And Keep The Right Kind Of Foreign Direct Investment

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Two of the largest banking and financial services institutions in the world, HSBC and UBS, have recently closed their local representative offices in Nigeria.

There’s also trouble brewing elsewhere in Nigeria’s business world that’s prompted fears about the climate for foreign direct investment in the country. Foreign direct investment is an investment made by a firm or individual in one country into business interests located in another country.

For instance, Nigeria’s government in September accused HSBC of money laundering after an analyst working for the lender said a second term for President Muhammadu Buhari may stall economic recovery  in Africa’s biggest oil producer.

There are also tensions between Nigeria’s central bank and the South African telecom company MTN. In 2015, MTN was fined about $5bn for failing to cut off unregistered SIM cards. This was later reduced to $1.7 billion after a long legal dispute and the intervention of South Africa’s then President Jacob Zuma.


Recently, the central bank has ordered MTN to repatriate $8 billion it said has been taken out of the country illegally.

Analysts are concerned that the Nigerian government’s attitude towards MTN and the two banks may erode the confidence of foreign direct investors. Their fears seem to be well founded: foreign direct investment in Nigeria fell to $1 billion in the first half of 2018, from $1.48 billion in the first half of 2017.

Foreign direct investment is crucial for any economy. So how can Nigeria attract and keep the right kind of investment from global companies? Compromise will be key, both for the government and foreign firms.

Why foreign direct investment?

Foreign direct investment is often preferred to exporting. That’s because while exports merely involve moving goods from one country to another, foreign direct investment actually involves an investor establishing foreign business operations or acquiring foreign business assets.

This often includes establishing ownership or controlling interest in a foreign country (for instance an American business establishing a physical business presence in Nigeria). Many emerging economies like China, Brazil, Vietnam and India have built their growth on FDI flows.

The trick is to attract “quality foreign direct investment” that links foreign investors into the local host country economy. The International Growth Centre, a British-funded research centre that aims to promote sustainable growth in developing countries, characterises “quality” here as contributing to:

  • decent and value-adding jobs and enhancing the skill base of host economies;
  • transfer of technology, knowledge and know-how;
  • boosting competitiveness of domestic firms and enabling their access to markets.

What Nigeria can do

There are a few things Nigeria can do to boost foreign direct investment. For starters, it must play fair. Foreign and domestic businesses should be treated equally. They should be open, transparent and dependable conditions for all kinds of firms.

Another area that needs attention is infrastructure. Businesses need easy access to ports, an adequate and reliable supply of energy and relative certainty that the country will be good to invest in.


Good institutions also promote FDI.

The government should encourage partnerships between foreign and local businesses. Foreign firms might be familiar with global good business practices, but local firms will be more familiar with the indigenous context. This synergy could be very beneficial.

It’s also critical that Nigeria gets its regional governments involved: there are many regions in Nigeria, and these regions all have unique opportunities and challenges. 

Our latest research shows that when the central government of Nigeria ran out of ideas and foreigners wanted to exit the agricultural sector, the regional government of Kwara state stepped in to create a positive business climate based on the cooperation of local banks, community members, and the foreigners themselves culminating in the Shonga farms public-private venture.

This has kept the firm in Nigeria. It’s also brought private investors to the table, bolstering the firm and the local economy.

Nigeria should also tap into its huge diaspora. There are many Nigerians living outside the country who understand its challenges. They should be encouraged to help, or asked to work with their networks to invest in the country.

What foreign firms can do

Foreign firms also have a role to play. They can enhance their success in Nigeria (and elsewhere on the African continent) in several ways.

First, they need a long term strategic plan. This means thinking carefully about what sectors or activities to target. Many foreign firms come to developing countries when things are rosy but leave when conditions change. They don’t properly consider that solving such problems will gain them a competitive advantage in the long run.

If they stay and follow a learning curve, foreign firms will better understand the local business context. They’ll also gain credibility among ordinary people and possibly get more customers and support that way.

In the same vein, foreign businesses should create local solutions that meet ordinary people’s needs. The banks leaving Nigeria have been accused of only catering to the needs of wealthy Nigerians, who are perceived as corrupt. A more diverse portfolio that catered to the needs of ordinary Nigerians would have nullified this claim.

Foreign firms must also work closely with credible and strategic local firms, and be willing to enter into dialogue with the Nigerian government where necessary. This is crucial especially as administrations may change or government policy may evolve. Dialogue could ensure that all parties are on the same page.

Act local, think global

It’s unfortunate that these banking institutions have decided to leave Nigeria. Hopefully both the Nigerian government and other foreign investors can learn from this.

The main takeaway for both foreign investors and governments involved in foreign direct investment is that it would be prudent for all parties to act locally but think globally.

READ MORE | Nigeria: To Invest Or Not To Invest? That Is The Question

READ MORE | Investment Marketplace Coming To Africa

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Cryptopia In Crisis: Joe Lubin’s Ethereum Experiment Is A Mess. How Long Will He Prop It Up?

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A year ago, Joe Lubin seemed like one of the most prescient people on the planet. Cryptocurrencies like ether were in the midst of a hockey-stick ascent, and Lubin, a co-founder of the Ethereum blockchain and one of its most articulate pitchmen, was scheduled to speak at events from Davos to SXSW. At his firm’s “Ethereal Summits,” it was standing room only, with crowds hanging onto his every utterance, no matter how bizarre. 

At one event in San Francisco in October 2017, he scolded attendees for hitting their television sets and for being rude to Siri, Apple’s digital assistant. “We designed Ethereum to enable machines and bots to be first-class citizens,” Lubin said with straight-faced sincerity as he espoused visions of decentralization, self-sovereignty and a democratized global society. “So be nice to the machines of this generation, lest some future artificial general intelligence who feels that you have been disrespectful to her ancestors decides to turn your carbon into something more useful to the future machine economy.” 

Lubin’s quip drew laughter, but in the autumn of 2017 the idea that blockchain—the distributed database technology underlying virtually all cryptocurrencies—would usher in a new world order didn’t seem far-fetched at all.

The price of a single ether token, a digital representation of money that’s similar to bitcoin, had just pierced $300, up from about $10 at the beginning of 2017.

It was on its way to a peak of $1,389 within the next three months. Forbes would soon name Lubin the second-richest person in crypto, worth as much as $5 billion, based largely on reports that he owned between 5% and 10% of all the ether in circulation, which by the beginning of 2018 had a market value exceeding $100 billion.

“The potential of this technology is just enormous,” Lubin, 54, tells Forbes in a recent interview. “It’s many orders of magnitude more valuable than [where the tokens] are sitting right now, because it’s going to permeate all aspects of society. We’re going to build everything on this technology.”

Back in late 2014, a few months after ether launched via crowdsale at 30 cents per token, Lubin created ConsenSys, a holding company he grandiosely describes as a global “organism” to build the applications and infrastructure for a decentralized world. In actuality, it is the first crypto conglomerate, comprising a network of for-profit companies supporting bitcoin’s biggest blockchain rival, Ethereum. More than 50 businesses were quickly spawned out of its Brooklyn headquarters, ranging from a poker site and a supply-chain company to a prediction market, a healthcare-records firm and a cybersecurity consultancy. 

But there were no fundraising rounds or debt offerings. In Lubin’s version of the decentralized future, he is the architect, CEO and central banker, funding all of ConsenSys’ “spokes” from his personal cryptocurrency stash.

Lubin has yet to veer significantly from this master plan, despite serious cracks in its foundation. For one thing, the Ethereum blockchain faces strong headwinds. Thanks to its perceived technical superiority—largely because it allows apps to be “embedded” in the blockchain—Ethereum became the launching pad for hundreds of initial coin offerings (ICOs), many of which in aggregate resulted in billions in losses for their supporters.

The crypto landscape is littered with the carcasses of ill-fated Ethereum-based ICOs, and now the SEC and other regulators are targeting some of them for enforcement action. In November, the SEC settled actions against two Ethereum-based startups, Airfox and Paragon, which had effectively sold $27 million in unregistered securities when they issued their ICOs in 2017.

Both tokens are now basically worthless.

Meanwhile, rival app-supporting blockchains like EOS, which processes nearly ten times as many transactions a day, and Dfinity, which recently raised $102 million from investors such as VC firm Andreessen Horowitz, are challenging Ethereum. But almost all blockchain technologies remain glacially slow. Ethereum can process only about 20 transactions per second. By contrast, Visa can handle 24,000. 

Yet Lubin’s organism keeps growing. ConsenSys has 1,200 employees, and some 200 job openings are posted on consensys.net. Though ConsenSys declined to comment, Forbes estimates that almost all of its businesses are in the red, some with little hope of profitability. Lubin’s global organism appears to be burning cash at a rate of more than $100 million a year. 

 When worried staffers have questioned Lubin about ConsenSys’ sustainability, Lubin has always had a pat reply: “Joe would say, ‘This is definitely not something you need to worry about. We can go on at this pace for a very, very long time,’ ” recalls Carolyn Reckhow, a former director of global operations who left ConsenSys in May.  

With the price of ether in free fall, down from $1,389 to barely more than $100 today, Lubin’s fortune may have dwindled to less than $1 billion, calling into question how long he can continue to fund his dream. It all depends on how much ether he sold—and when.

Like Ethereum’s other cofounders, Vitalik Buterin and Anthony Di Iorio, Lubin grew up in Canada. A self-described computer nerd whose father was a dentist and whose mother was a realtor, he attended Princeton in the mid-1980s, where he played squash and was roommates with future billionaire hedge fund star Mike Novogratz, who, like Lubin, would ultimately pivot toward blockchain and crypto. After graduating in 1987 with a degree in electrical engineering and computer science, Lubin started in tech at Princeton’s robotics lab, but he eventually made his way to finance, building software for Goldman Sachs and later running a successful quant hedge fund. 

Lubin’s office was not far from Ground Zero during the September 11 attacks, and the harrowing experience threw him into an existential crisis. Over the ensuing decade he became deeply depressed about the state of the world. 

“It was folly to trust all those structures that we implicitly felt had our best interests at heart. … I felt we were living in a global society and economy that was figuratively, literally and morally bankrupt,” he said at ConsenSys’ Ethereal Summit in May 2017.

I was confident that our economy and society were in a slow, cascading collapse.

Lubin foresaw two equally catastrophic outcomes: Central bankers would eventually debase currencies to pay off mounting debts, stifling growth for decades, or some unexpected “nonlinear” event would create great hardships and send the world into the worst economic depression it had ever seen. So distraught was Lubin that he traveled to Peru and Ecuador looking for land he could escape to.

Then in early 2011, Lubin read the bitcoin white paper and had an epiphany: “Decentralization was a game-changer.” 

Reading all he could on bitcoin, Lubin was eventually introduced by Di Iorio to Vitalik Buterin, Ethereum’s then 19-year-old creator and boy genius of crypto. Having read Buterin’s November 2013 Ethereum white paper, Lubin got in on the ground floor of the Ethereum project and attended the group’s foundational meeting in Miami in January 2014.

He continued as part of the core group through Ethereum’s $18 million initial coin offering in July 2014 and was rumored to be one of the biggest buyers during the token’s initial crowdfunding, at prices estimated to be well below a dollar. Ultimately, Ethereum’s founding team bickered and parted ways. Buterin continued to focus on the technology, while Lubin hatched his plan to create a business ecosystem around Ethereum. 

For ConsenSys’ headquarters, Lubin chose the hipster-heavy Bushwick neighborhood of Brooklyn. From the outside, 49 Bogart Street looks dingy: The door is covered with the kinds of stickers you’d see in a bar bathroom and is surrounded by graffiti. The interior isn’t all that different. ConsenSys occupies multiple lofts alongside residential apartments.

When it came to organizational structure, Lubin wasn’t having any of the typical corporate hierarchy. His ConsenSys would be a so-called holocracy—no managers or reporting structures. Decision-making would be decentralized, and employees could choose their own titles. Few had permanent desks. 

“Every day, it was so lax that I’d walk in and didn’t know if I had a seat. Literally, it was like Game of Thrones,” says Jeff Scott Ward, who joined ConsenSys in June 2015 and left the company in early 2018. There was one toilet for 30 people on the floor, Ward says. The company didn’t hire a human resources person for almost a year and a half. ConsenSys’ first projects, or spokes, included accounting software for cryptocurrency transactions and a blockchain-based digital-rights platform for musicians. Most of the ideas for spokes came from ConsenSys employees, and once a project was approved, Lubin would give the startup between $250,000 and $500,000 to get it off the ground. 

The goal was for the spokes to become self-sustaining businesses, and in an effort to foster this, they would occasionally be spun out into their own legal entities. Lubin’s broader goal is to turn his Ethereum ecosystem into a what he calls a mesh, whose strength is derived from the spokes’ inter-connectivity. 

Only a handful of the spokes ConsenSys has launched have gained traction. Balanc3, the accounting software project, says it has more than 25 business customers (though it won’t specify any), each paying at least $25,000 a year. Another, Kaleido, helps companies implement blockchain technology. It has 1,900 users and says it just began charging for its services. Amazon Web Services recently announced that its ubiquitous hosting platform is compatible with Kaleido’s blockchain offerings. ConsenSys has built technical tools for Ethereum that programmers have downloaded millions of times, but the company doesn’t charge for them.  

Lubin has been less rigorous than traditional venture capitalists in approving projects. “Joe is the kind of person who tends to want to keep his options open and say ‘Yes, why not?,’ ” says Reckhow, who’s now head of client services and operations at Casa, a crypto-wallet company. “He’s lucky to be in a position where that works well, but he’s not as good at prioritizing. He’d rather say yes to everything.”

Being the Daddy Warbucks of the Ethereum blockchain is fine when digital money is trading at stratospheric levels, but as cryptocurrency enters another bear market, Lubin, who admits to periodically selling crypto to fund operations, may need to start pulling some plugs.

In 2017, Mark Beylin, a student at the University of Waterloo in Canada, came to Lubin with the idea for Bounties Network, a marketplace for freelance jobs that’s similar to the popular website Upwork but uses Ethereum’s smart-contract technology, which helps with billing. After one year in operation, Bounties Network has seven people working on it and just $400,000 in total “bounties,” or offers for jobs, which range from $171 for an 800-word blog post on the future of work to $67.30 in exchange for translating a white paper into Portuguese. Bounties Network has generated revenues of less than $50,000 so far.

In October 2016, Jared Pereira, an 18-year-old high school graduate living in Dubai, pitched Lubin on Fathom, which aims to somehow disrupt the higher-education business by crowdsourcing academic evaluations and grading. Lubin gave the go-ahead, but two years later the project has six people working on it and no launchable prototype. Its website is nothing more than a few pages stating high-minded ideals: “If individuals were free to build their experiences tailored to their unique aims, and were able to communicate those experiences reliably to any entity in the world, there would be an order of magnitude shift in the efficacy of social organization at every scale.”

Other projects that have been staked by Lubin seem even flakier. Cellarius, a spoke that Lubin often promotes by wearing an eponymous T-shirt, is a “transmedia cyberpunk franchise” aimed at collaborative storytelling on the blockchain. What exactly is collaborative storytelling, and why will the blockchain make it better or more profitable? Its website’s explanation is far from clear.

Lubin insists ConsenSys is getting more selective in picking projects. But old habits die hard. In October it bought a nine-year-old asteroid-mining company called Planetary Resources. “We see it as a group of amazingly capable people who are interested in exploring how blockchain could ramify on space operations,” Lubin says abstrusely. Civil, a spoke that aims to put journalism on the blockchain and is supposed to somehow increase the level of trust in news, recently had to cancel its ICO because it failed to raise its minimum target of $8 million. Some of the journalists in Civil’s 18 newsrooms say they have yet to receive compensation in the form of tokens they were promised. (Disclosure: Forbes recently announced a partnership with Civil.)

ConsenSys also offers consulting services, essentially assisting companies in becoming blockchain-literate. To date, this is the best business ConsenSys has. In the short run, these services will succeed—until companies wake up and realize that blockchain isn’t necessarily better for most things and is sometimes worse than other technologies. ConsenSys consultants helped create Komgo, for example, a consortium of 15 big banks that includes Citi, BNP Paribas and ABN AMRO. Komgo wants to use the blockchain to bring efficiency to the financing of goods shipped around the world, like oil. ConsenSys consultants are also working with UnionBank in the Philippines to speed up money transfers.

In the past year, ConsenSys’ consulting arm has grown from 30 employees to more than 250 and, according to Lubin, is bringing in “tens of millions of dollars” in the form of cash and equity stakes.  As for ConsenSys’ spokes, which are mostly applications and developer tools, Forbes estimates the whole lot of them won’t generate more than $10 million in revenues in 2018. 

So far, ConsenSys’ biggest non-consulting successes are its tools for Ethereum programmers. Its MetaMask product, which lets users log in to Ethereum from a Web browser, has more than one million downloads (all of them gratis). Truffle, which helps developers manage and test parts of their code for building Ethereum applications, has also cleared one million free downloads. It can be difficult to charge real money for these tools because of the communal, quasi-anarchist nature of the blockchain developer community. ConsenSys claims it will soon start charging for Infura, another tool that facilitates access to Ethereum. 

“ConsenSys has done more for the Ethereum ecosystem in its first five years of development than any other firm,” says Meltem Demirors, chief strategy officer at CoinShares, a crypto-asset-management company. 

None of this seems to phase Lubin, who is clearly not launching projects to make profits. “The intention isn’t to create companies and send them out and make money,” he says. “The intention is to create an ecosystem. It really is very family-like.” However, Lubin also acknowledges that changes are in order and recently sent a memo to his staff about becoming leaner and more focused. “In ConsenSys 2.0,” Lubin says, “we’ll pay more attention” to the market-based hurdles that traditional startups have to clear. And he’s not ruling out layoffs—even in its consulting business.

The biggest problems at ConsenSys may have less to do with plunging crypto prices and Lubin’s dwindling fortune than with his conglomerate’s weird operating structure. 

ConsenSys would like to believe that it’s reinventing the future of work and business. As you enter ConsenSys’ hacker-chic Brooklyn digs, there are lots of antiestablishment touches, including a large banner on the wall that reads, “Welcome to the decentralized future.” 

In fact, CEO Lubin tries not to tell people what to do. “He wants to be like the anti-CEO or the anti-founder,” says Jeff Scott Ward, a former employee who thinks this is partly because Lubin is a nice guy who wants to be democratic. 

But there are some not-so-nice consequences of having Mr. Nice Guy in charge. At ConsenSys, there’s less incentive to meet deadlines and make fast progress. “In a lot of ways, there still isn’t pressure to generate revenue or hit targets that normally Silicon Valley VCs and businesses would be looking for,” says Griffin Anderson, who leads the Balanc3 spoke. One Glassdoor commenter describes ConsenSys as a place with “unlimited funding and no pressure to actually deliver anything.” 

The lack of traditional structure has also spawned ugly politics. “It feels a little like Survivor,” says Lucas Cullen, a former employee. ConsenSys staffers who are close to Lubin get faster access to resources, says a former employee, and accountability varies widely from team to team. 

ConsenSys does have Resource Allocation Committees, which are charged with deciding whether spokes will continue to receive additional engineers or funding. But the committees are in a constant state of flux. “There’s always one person from finance, but they’re generally made up of people who have an interest in your area,” says Thomas Hill, a cofounder of Truset, a ConsenSys spoke that’s building a crowdsourced business data platform. “Anyone can sign up for an RAC.” 

According to Ward, who spent three years at ConsenSys, “There were too many cooks in the kitchen. It was like, Whose ego is the strongest? It was exhausting,” he says. UPort, a tool aimed at letting users log in to Ethereum applications, had three project managers, who couldn’t align on a single vision. Today there are just 15 applications using UPort, and the project is splitting in two. 

Many describe ConsenSys’ culture as chaotic, and the company seems to have trouble keeping track of its projects. ConsenSys’ homepage says it has “50+ spoke companies,” but during the reporting of this story, the number ranged from “more than 30” to, most recently, 42. It’s a “fluid number,” says a company spokesperson.

Lubin acknowledges some of these difficulties. “[Accountability] has been an issue at ConsenSys,” he says. “We’ve been working to put in place various mechanisms to make it clearer who’s responsible for what and to ensure crisp accountability.”

But he also cites real benefits to his mesh architecture. Projects are collaborative, and silos are easily breached. Employees report that there is little stigma attached to questioning others’ assumptions. And some insiders report feeling empowered by the autonomy—especially the opportunity to move laterally among projects. 

According to Hill, the Truset cofounder, “ConsenSys will end up in the Harvard Business Review as a case study, either as a lesson on how you change corporate organizational structure or as a disaster.” 

If there is a paradox in Lubin’s quest to reinvent business for the coming age of decentralization, it’s that ConsenSys is actually much more centralized than Lubin would like to admit. 

When ConsenSys spokes have spun out and become separate businesses, for example, Lubin has retained ownership of 50% or more. Thus, like John Pierpont Morgan and Andrew Carnegie during America’s Gilded Age and tech magnates Jeff Bezos and Mark Zuckerberg of the internet age, Lubin is setting himself up to become one of the controlling titans of the blockchain era.“This is where the whole mesh-and-decentralization thing falls apart,” Ward says. “It was never clear who had what stake.” In the case of Grid+, one of the projects ConsenSys spun out through an ICO, Forbesestimates that Lubin walked away with no less than 20% of its tokens, in addition to half of its equity. 

“I don’t think they even have the slightest idea what decentralization is,” says Demirors of CoinShares. 

And the issue of sharing ConsenSys’ equity among its 1,200 employees has become a running joke. Former employees report that for a long time Lubin was evasive and the plan was always “six weeks away,” if you asked him. In fact, the first set of 100 employees or so received their equity in early 2017, and nearly two years later, ConsenSys says, it’s still working on a plan to give its larger workforce a stake in the company.

Lubin doesn’t think ConsenSys’ structure presents contradictions. “If you can build a system that serves many people and they’re all delighted with the system, then the originating structure doesn’t necessarily have to be equally owned by lots of people,” he says, in a response that could have just as easily been uttered by Zuckerberg on the eve of Facebook’s lopsided public offering.

In 2017 ConsenSys was able to use ICOs as an easy and lucrative way to spin companies out and reward internal staff. But now that the SEC is cracking down on ICOs, that window is much smaller. “As we look to make more external investments, there are specific deals where we need to map to a traditional VC model,” says Ron Garrett, head of ConsenSys Labs, the division responsible for deciding which projects become spokes. “In those deals, we’ll take less equity.” He adds that other startup incubators like Betaworks are known to take -majority stakes in the companies they incubate. So much for democratization and decentralization.

For now, Joe Lubin’s grand experiment in the future of business is racing against a clock:

Will blockchain applications achieve mainstream success before Lubin’s largesse is exhausted? 

Even the most successful applications on Ethereum have tiny user bases. The most widely used application is a decentralized exchange for trading crypto called IDEX, which is unaffiliated with ConsenSys. After more than a year in operation, it has a pitiful 1,000 daily users. “We knew that it was going to be a lot of work and take a long time before you enable massive evolution on a planetary scale,” Lubin says. 

If Lubin is still a billionaire, he may be able to sustain ConsenSys for several years—even at its $100 million-plus annual burn rate. “As it stands, ConsenSys is stable and healthy,” he insists. 

At what point will Lubin throw in the towel? “I have no exit plan, and I’ve never had an exit strategy for anything I’ve done,” he says from ConsenSys’ San Francisco offices, where he just hosted a “demo day” for 16 startups eager to join his bankroll. “I’m all in.”

  • This story appears in the December 31, 2018 issue of Forbes



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