Internet Extraction Markets

Believe app is so poorly constructed it has to be a grift

The current crypto meta garnering attention and liquidity are “Internet Capital Markets.” Basically, it’s the idea that crypto can replace venture capital by having startups launch tokens that people can buy, with a portion of the fees going to the founder, giving the founder liquidity outside of the traditional round.

The driving force of this meta is Believe.

If that is truly the intent of founder Ben Pasternak and his Alliance backers, then that’s a worthy mission. But, it’s so poorly constructed that I’m having a hard time believing it’s anything other than a well-crafted grift. The way they have it now, it’s more accurate to call them Internet Extraction Markets.

No Relation To Crypto

The startups that Believe has featured so far include an AI Deepfake app, a crypto slither.io clone, a calendar tool, a social media app, a voice AI tool, an AI chat tool, a copytrading app, an AI UGC tool, and a furniture finding tool. Besides the slither.io copycat, none of these startups have anything to do with crypto.

This shouldn’t be a surprise. Internet Capital Markets aren’t a new idea. Alliance DAO pushed the idea before with Vine launching on Pump Fun. As I’ve written before, expecting founders to raise funds via a token launch is an extraordinarily stupid idea.

There’s a reason venture capital exists: to give founders the money they need to build in peace. Tokens are a fundamentally public thing, and almost always result in a bigger headache than they are worth. This is why you never see a real crypto startup raise via the token. It’s always a web2 startup that does.

And that’s what you see on Believe.

Memecoins, not equity

The Believe team and their backers aren’t stupid. They know that no serious builder wants randos buying equity in their startup on the public market, and they know that trench warriors won’t buy worthless crypto startup tokens. So, they explicitly focus on web2 founders and advise them to make their coins as useless as possible.

Believe isn’t selling access to startup equity, but memecoins. Memecoins with no relation to the startup besides their name and which the insiders couldn’t dump fast enough.

There is nothing fundamentally wrong with memecoins. But, it’d be nice if Believe was more explicitly honest on what they are doing here. They see are democratizing access to venture capital. That is true, but the implicit idea here is that traders get to buy startups they normally wouldn’t be able to. That’s not what’s happening here at all. What’s actually happening is that founders get to profit off of the speculative glee of traders chasing memecoins attached to their startups.

So, yes, Believe is democratizing access to venture capital, but really they are just a well-designed extraction scheme built to benefit founders.

Qiao from Alliance at least tried to be honest about this even if he still tried to hide it under an overly optimistic mask.

But what about growing the pie?

One argument in favor of Believe is that they are bringing in builders who otherwise wouldn’t be interested in crypto.

The same argument was made bydefenders of the widely-derided celeb meta made. It’s a good thing that Jason Derulo wants to get involved in crypto, look how many followers he has! The problem with this, that people rightly pointed out, is that they don’t actually have an interest in crypto. They are coming here for a quick buck, and once they get it, they are going to bounce, simultaneously confirming the reputation of crypto as a scam to their fans not already involved and taking the money of those of us already involved.

This is exactly what happened. Old participants and more importantly new fans both lost money, confirming in their mind that crypto is a scam. Instead of growing the pie, the celeb meta extracted countless dollars out of the system and shrunk the possible userbase.

Unfortunately, I see a similar outcome for Believe. These founders aren’t crypto founders, and they aren’t going to become crypto founders after they see the vitriol thrown their way once the tokens start going down in value. If they wanted to be crypto founders, they would’ve already had a crypto component to their app.

Whether they admit it or not, they are here for a quick buck. And that’s ok, that’s the entire point of Believe! But, let’s not pretend that this will attract more devs to the space. If we want to do that, we need the VCs to actually fund the devs we already have.

If it looks like a grift…

I want to Believe that Pasternak and his backers have good intentions. But, these obvious shortcomings, the fee structure, and the history behind it make it hard for me to do so.

Believe was originally founded as Clout. Clout was basically a Friend Tech clone, as it allowed celebs and influencers to launch a token of themselves. Friend Tech was infamously one of the greatest extraction events in crypto history. Clout quickly failed because the app was horrendously buggy, Pasternak went away for four months, and now he’s back with Believe.

Did he find his true purpose in helping founders in those four months? Maybe. But I have a hard time believing that somebody whose first idea is to run back one of crypto’s greatest failures now has purely altruistic intentions. If he really wants to help founders, why is he taking 50% of all fees? For context, Apple takes a 30% cut from their apps, a take rate so large that people have taken them to court over it.

There are just so many obvious problems here, from the idea itself to the way it’s branded, that I just don’t see how people as smart as Pasternak and his advisors could launch this as anything other than an extraction scheme. On some level, that’s ok. It’s part of the game. No crying in the casino.

But, as traders, we have to be aware of what’s going on here. So dance while the music is on, but make sure you have a chair ready.