Most startups raise funds by either selling equity or going through debt financing but Braintrust has gone another way: token sales.
The San Francisco company has raised $124 million since it was founded in 2018 — completely through sales of its own token, which trades on Coinbase as BTRST.
On Thursday it announced the majority of that raise: a $100 million sale to investors including two New York-based investment firms, Coatue and Tiger Global Management, as well as True Ventures and HashKey. This is Coatue's second foray into purchasing crypto tokens and Tiger Global's first.
Braintrust is a web3 project run by Freelance Labs that was founded in 2018 by Adam Jackson and Gabriel Luna-Ostaseski. It runs on the Ethereum blockchain protocol and user-owners can vote on how the company operates. Each token is worth one vote.
Its users are corporate information workers around the world who are available on a contract basis. Essentially, they're tech freelancers.
"Imagine Uber owned by its drivers, DoorDash owned by its dashers. In Braintrust's case, it's a talent network owned by its talent," Jackson said. And when there's a smaller cut being taken off the top, "all of a sudden bigger, more ongoing and much more interesting jobs can touch the network. And now people can leave their corporate job and freelance full-time because they're not paying these giant fees to a corporate middle man."
The BTRST token was minted in September at the same time the platform launched publicly and there's a finite amount: only 250 million tokens will ever be available. The $100 million sale to investors represents around a 5% total stake, Jackson told me.
Globally there are over 100 companies catering to freelancers of all sorts, according to Crunchbase. Of those, six are based in the Bay Area including Braintrust, Wonolo and Upwork. The latter is one of the oldest freelance marketplaces and has operated for over two decades. Israel's Fiverr, another well-known marketplace for freelancers, has been around for over a decade.
Most of its competitors are top-down for-profit enterprises, as are the largest gig economy players around the world like Uber, Lyft, DoorDash and Instacart. Braintrust is both a nonprofit operation and user owned. Freelance Labs — along with five other organizations that built the Braintrust platform — is a for-profit operation with Jackson as its CEO and Luna-Ostaseski as its chief revenue officer.
In order to fuel its basic operations, Braintrust takes a 10% fee from corporate users, which it calls clients, when they hire workers for a project. Freelancers, or talent as the site calls them, pay nothing and keep 100% of their earnings in the local currency where they live.
That fee will also fund a community grants program for projects spearheaded by members to build out the Braintrust platform.
Freelancers also have the opportunity to earn Braintrust tokens by engaging with the site through things like referring new talent and clients.
"This is one of the first web3 projects that is grounded in a real, everyday use case – connecting companies with the talent they need to stay relevant. It’s rare to see this kind of growth and revenue achieved in such a short period of time," Griffin Schroeder, a partner at Tiger Global Management, said in a statement. "This Braintrust community is harnessing the powerful and unique use cases for blockchain technology.”
Jackson told me that Tiger Global and Coatue reached out to Braintrust because they wanted to invest in an emerging web3 platform. And the team said, cool, you can do so by joining the community.
"We really have no use for raising lots of money. So if you come, we want you to join as a client on Braintrust. We want you to help us build the network somehow," Jackson said. "Coatue interestingly was like, yeah, we can do that. We'll onboard as a client and we'll help you build out your network."
Coatue also offered to provide Braintrust with recruiting services to aid in product development.
The startup launched out of stealth around 18 months ago and says that its gross services revenue, or the total value of the work that freelancers produce through the platform, has grown to $28.5 million monthly from $1.2 million in June 2020.
Additionally, it has close to 500 clients — including companies such as Deloitte, NASA, Intel, Nike, IBM, Nestle and Under Armour — which is up from fewer than 70 when it emerged from stealth. It's also grown from around 2,220 freelancers to more than 36,000 over the same period.
According to Coinbase, there are 83.8 million BTRST tokens that have been issued to date representing around 34% of the total supply. The token has lost around 50% of its value since September when it traded at around $10, and had a one-time spike to $47.
