The glamorous world of private jets is no longer the domain of the super-rich. Private aviation is set to soar in Africa as business keeps checking in.
Well-heeled women glide in and out of an opulent mansion in a leafy suburb in Sandton, Africa’s richest square mile.
The champagne-colored granite of the stairway meets the elegant tips of their Manolo Blahnik stilettos.
This is a medical aesthetic and holistic wellness center called Anti-Aging Art in the posh suburb in Johannesburg.
It is a home-turned-medical center belonging to Reza Mia, a doctor and co-owner of the clinic patronized by the rich and famous. Mia also happens to design jets, as the founder and CEO of Pegasus Universal Aerospace, an aviation company based in South Africa with the sole purpose of creating innovative aviation solutions.
Between surgical facelifts and building sophisticated jets, Mia finally makes time for an interview at 5PM on a Friday afternoon.
Dressed in navy blue scrubs, he sits on a luxurious leather sofa as he tells FORBES AFRICA about his connection with aviation.
Mia is currently designing a vertical take-off jet that he says will add to the convenience of private travel.
The aesthetic surgeon has been developing the Pegasus One Vertical Business Jet (VBJ1) since 2012, which he says will be completed in three years.
It’s an attempt to revolutionize luxury air travel in South Africa.
“It can land and take off like a helicopter anywhere a helicopter could, in fact more places because it doesn’t have a spinning rotor blade and it is quieter especially for built-up areas and neighborhoods. It can accelerate and fly at the speed of a business jet which is almost 800km/h so that is about four times the speed of a helicopter,” he says.
Cool-air fan technology allows the jet to take off and land anywhere, he adds, which means it’s less hassle for customers.
Privacy and convenience count as currency in this business.
Business aviation company, ExecuJet Aviation, currently operates and manages four bases for private jets in Africa.
The Johannesburg base is located at Lanseria International Airport, about an hour’s drive from the city.
The flashy cars in the parking lot speak about the kind of travelers taking off from here.
Staff meander in and out of the private terminal on this busy day, yet there is no millionaire in sight in an expensive Armani suit jetting off for his next business trip.
You never see them, they are that discreet about client privacy.
On a global scale, the company manages and operates about 260 aircraft and is also in Kenya and Nigeria, with the newest entrant in Seychelles.
With almost three decades in the aviation industry, the company has kept a close watch on the rising market of business aviation in Africa.
Stationed on the apron is a white Bombardier Challenger 300 worth about $26 million.
The nine-seater aircraft boasts a bathroom and features glossy cherry-wood surfaces.
This gloss is all-pervasive and there is not a speck of dust in sight.
The soft, plush carpet is a shade lighter than the grey leather seating decked with comfy cushions that enhance the elegance.
ExecuJet’s Africa Vice President, Gavin Kiggen, says despite the demand and increase for private travel on the continent, perceptions of the industry can be misleading from both a business and client perspective.
“The margins are extremely low and the competition is very strong because you have new entrants who are trying to get market share.
“The perception is that it’s lucrative because of the kinds of tools and services we offer but it is a tough industry to be involved in,” he says.
As a developing region, Africa needs to prioritize infrastructure while attracting sales to uphold the competitive edge in the global business aviation market.
This can be achieved through innovative ideas. Promoting the economic benefits of the market will lure investors from all over the world.
Time waits for no man, and Africa’s elite, exclusive travelers know that only too well.
According to a review by Mordor Intelligence, Global business jet market – growth, trends and forecast (2018 – 2023), the exclusivity of private jets has ceased to be the domain of the extremely wealthy.
This change is owing to time-share and fractional ownership of aircraft.
ExecuJet reports Africa has 481 registered private jets and the year-on-year growth for the business aviation industry in Africa is 44%.
Private aviation is still a growing market in Africa in comparison to the regions where it is fully developed.
Approximately three quarters of the sale of business jets is in the west, mainly in North America and Europe.
Predictions are that India and China are well on their way to become market leaders by 2020.
With continued industrial growth in Africa, consequently, there has been a rise in business travel.
Despite the lag in competitiveness on a global scale, private aviation in South Africa, which is Africa’s second-largest economy, has the potential to take the continent to new heights as business keeps checking in.
Private jets are commonly used by high-net-worth individuals, business executives, sports teams and government officials.
Time efficiency is the core reason why these jetsetters prefer private aviation over commercial planes. Greater control over flight schedules and operation of the aircraft forms part of the package.
Add privacy and a dash of luxury and the high-flyer is ready for take-off.
The Jet Traveler Report 2018, the global perspective on who flies privately and how, by Wealth-X, categorizes high-fliers into three types to make a comparison based on their flight preferences. These include owners, members and the wider ultra-high-net-worth audience.
Unsurprisingly, 35% owners of private jets are worth more than $500 million as per The Jet Traveler Report.
The majority are over 60 years old. ‘Members’ are frequent fliers on membership programs.
Private jets have now also become more accessible and appealing to the wider executive population.
The report states that on-demand private fliers are the youngest and least wealthy ultra-high-net-worth individuals.
In comparison to the wealth of members and owners, these jetsetters have average wealth of $67 million.
Editor and publisher of SA Flyer and FlightCom magazines, Guy Leitch, says although the South African market is showing signs of recovery, there are shortcomings.
“Poor on-the-ground infrastructure for aviation, poor access to aircraft finance and the lack of aircraft does not ensure adequate support for development,” he says.
The same can be argued for the rest of Africa.
According to the Mordor Intelligence review published in April, lack of infrastructure is one the biggest limitations that affect business jet sales in South America, Africa and the Asia-Pacific.
The costs of building the much-needed infrastructure are so high operations may not be feasible.
Regions like Europe and North America with higher private aircraft demands have lower costs. Flying privately in the regions is charged on a one-way basis, therefore costs are reduced as opposed to Africa where charges are doubled.
“In those regions, there is always an aircraft available that’s going to your destination and you can pay a reduced rate because it is considered an empty leg. Our industry is unfortunately not that far ahead yet,” says Kiggen from ExecuJets.
Industry data by Global Jet Capital released in 2017 indicates that 2025 will witness more than 25% growth in the market.
The influx of new aircraft on the continent is forecast to have a value of $3.9 billion, or just under $500 million per year.
The emergence of the “African affluent” demographic on the continent has become an important emerging segment for the private aviation sector.
These individuals are younger than their European counterparts and are on average 40 years old, according to a report by ExecuJet called The Evolution of Charter Into Africa 2018.
Smartphones and technological mobility make it easier for young flyers on the go, and as a result, gives the market more visibility and mileage.
“Social media has also brought a phenomena called the influencer; these are rich kids or media personalities who document their travel through social media (Instagram, Facebook and Twitter),” says Kiggen.
These jetsetters snap the glitz and glamor of private flying and share it with other influencers. This also makes it easier for private charter companies in Africa to attract clients from different spheres of life, thus changing the perception that jets are only used by the ultra-rich and famous.
In addition, an increase in enquiries for hiring the jets, from even car manufacturers for their marketing events, shows the market is paving the way for more diversified business.
Jeremy Nel, the CEO of Luxury Brands, a South African luxury marketing group based in Cape Town, argues that although high-flyers use their mobile devices to source best rates and most direct routes, the reputation of the private charter as a brand is something potential clients continue to look out for.
“The branding of the aircraft is also aligned to be the best fit, most clients who outright purchase an aircraft will take the plethora of advice as to the most suitable model for their needs and then choose from the best breed of operators,” says Nel.
Inner-circle referrals and the relationship the client has with the company, in addition to the preference of a specific pilot, can further influence decision-making.
Back in the richest square mile of Africa, Sandton, in a modern office adorned with waterfalls and earthy décor, a tall man dressed in a blue shirt walks in.
When he is not flying over the shimmering turquoise waters of the Maldives, South African pilot Jack Coetzee is the Managing Director at Quintessential Aviation.
With over 1, 500 flying hours to his credit, Coetzee has seen private jet passengers with requirements ranging from Egyptian cotton linen to Kentucky Fried Chicken on the flight.
“It is aircraft-orientated; they like a specific type of aircraft.
“[The customer] knows how the seats work, he knows the pilots invariably that are flying the aircraft are competent,” he says.
As for aspiring owners, Leitch emphasizes they understand the importance of the technicalities of owning an aircraft, to avoid losing money.
The first step is to determine what it will be used for, and then take the size, range and price parameters into consideration.
“New or used [aircraft], it doesn’t matter. Make sure you can crew it, maintain it, afford it and then order it,” he says.
Much like commercial aviation, owners and private charter companies must comply with air laws and the strict regulations set by the civil aviation authorities.
Odette Basson, Charter Manager Africa, at ExecuJets, says some laws are airfield dependent.
This is based on where you are traveling in and out of, so compliance is critical.
“Yes, you can be an owner of a private aircraft but it doesn’t mean you can just do what you want. There are laws that govern the flying,” she says.
In addition to overseeing operations above the ground, regulators keep a close watch on the hours the crew fly, which aircraft they are flying and how frequently they go for training.
“Your crew must be trained specifically, the aircraft must be maintained specifically and according to the operator’s specifications. You must have a commercial license to operate and you must have an air service license. It is actually very well-regulated and governed to death,” says Kiggen.
And thus it is that millions of dollars fly over the richest and poorest cities of Africa.
The sky is a commodity. How much are you willing to splash out for a piece of it?
Cryptopia In Crisis: Joe Lubin’s Ethereum Experiment Is A Mess. How Long Will He Prop It Up?
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
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
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.”
- Reach Jeff Kauflin at [email protected] and Sarah Hansen at [email protected] Cover image by Filip Peraić.
- This story appears in the December 31, 2018 issue of Forbes.
IN PICTURES | Chimamanda Ngozi Adichie gives Nelson Mandela public lecture
“When it comes to history and memory … it’s easy to remember Nelson Mandela, because he is Nelson Mandela. Who determines whose story we value above others?”
This was a question asked by Cathy Mohlahlana, the facilitator of a panel discussion at the Nelson Mandela Tribute to mark the fifth anniversary of his passing.
Celebrated author and notable feminist Chimamanda Ngozi Adichie was the keynote speaker at the event hosted by the Nelson Mandela Foundation at the UNISA Ormonde campus in Johannesburg, South Africa on December 12, 2018.
Before Adichie’s address, the audience was regaled by the sounds of the Soweto Gospel Choir who sang songs such as Thina Sizwe, Lizalise Idinga Lakho, and Brenda Fassie’s Vul’indlela.
In paying homage to other anti-apartheid activists, the choir concluded their performance with the Peter Gabriel song Biko. The song is named after Bantu Stephen Biko who died in police detention in 1977, and was at the forefront of the anti-apartheid campaign the Black Consciousness Movement.
Nelson Mandela Foundation chief executive Sello Hatang also acknowledged Pan Africanist liberation hero Robert Mangaliso Sobukwe, who he says was a “towering figure in our history and a man who the apartheid regime tried to erase from memory”.
In recognizing the role played by women in the struggle for South Africa’s liberation Hatang said, “we should also remember that this year is about mme (mother) Albertina Sisulu, and those women whose stories and contributions were distorted an minimized by the structures of patriarchy … We should also remember that this is the year we lost mama Winnie Madikizela Mandela.”
Activist and wife of late former President Nelson Mandela, Graça Machel, was also in attendance and listened attentively as Adichie spoke about the power of memory and public imagination. “When I first came to South African ten years after the fall of apartheid, it felt to me as though the past was not yet passed, but that there was a concerted collective resolve to turn away from this truth. South Africans of all races spoke to me of the rainbow nation, and I did not entirely trust this optimism. Well-choreographed as it was.”
“It felt to me a little too easy … It cannot be so unbearably, terribly tidy this process of peace-making,” Adichie said.
Sebabatso Moneli and Neo Muyanga were part of the panel discussion facilitated by Mohlahlana.
“We are entitled to rage. We are entitled to anger – to the grief of a painful history. But, we are also invited by history to a breath of stories that expand beyond the stereotypes of slavery and colonialism.
“African history is vast and I believe that part of the freedom that we are looking for, that our true liberation will not be found in the absence of tension, but in embracing the tension of history,” Moneli said.
While interrogating the idea of telling the facts and the truth, Muyanga added, “the responsibility is all of ours … The process of colonization which is premised on the idea of erasing the original memory and replacing it with the colonists’ memory. So history begins with the arrival of the colony as opposed to the stories we tell of ourselves before.”
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