Ep. #7, Feat. NFX Guild’s Tammy Camp

Peter Chapman: Today I'm joined by Tammy Camp at NFX. Tammy, welcome to Venture Confidential.

Tammy Camp: Thanks for having me, Peter.

Peter: Such a pleasure, it's a sweltering hot day here in San Francisco. You're actually my first Venture Confidential guest to go the beer instead of the coffee route.

Tammy: What could I say, I must be more fun than all of the rest of the people.

Peter: So, I'd love to start with you. You got your start doing growth marketing before wading into venture.

Tammy: That's right.

Peter: Tell me about that. What were the early years of Tammy's career like?

Tammy: Right, so I started back in 2001, when I was a senior in college. I was playing the affiliate marketing game. I met a person in Europe and he was making a million dollars a month net from affiliate marketing. This is during the wild west days of the internet. He was an advertiser for NexsCard. Do you remember that? NexsCard, the Internet's credit card. It was all over Yahoo! when Yahoo! Used to be the number one search engine?

Well that was the card. I picked his brain and I was like, "please show me what you're doing," and he did and so, I started doing affiliate marketing. And what I would do is, buy traffic for companies like Expedia and Priceline and eBay, when they were starting out in Europe.

So I would buy traffic in U.S. dollars, but in the UK market, but get paid out in pounds. So I was effectively making commissions on sales and then playing the geoarbitrage game on ads. And that's kind of how I got started in my career.

Peter: Interesting, I like this early arbitrage experience, we're going to come back to that when we talk about modern currency exploits. What got you into venture?

Tammy: Well, let's see. I was head of growth at Stellar, a protocol non-profit started by Jed McCaleb, which was the founder of Ripple and also Mt. Gox and eDonkey. And they were doing some rewrites of the protocol at the time and I had a girlfriend reach out to me who's also in venture, Stephanie Palmeri, she reached out to me telling me about this opportunity at 500, you know.

The 500 opportunity about them needing more people that had like this distribution background. And I jumped on it. So I spent two years at 500 Startups as a partner investing in startups, but also doing their growth marketing curriculum for the Silicon Valley accelerators, which would happen four times a year. So once quarterly, twice in the San Francisco offices and twice in the Silicon Valley offices.

Peter: You put together this thing called Marketing Bootcamp.

Tammy: It was Marketing Hell Week.

Peter: Marketing Hell Week, sorry. What happens in Marketing Hell Week?

Tammy: It's exactly what it sounds like, you know, it's a crash course in startup marketing, so it's just five days of packed growth curriculum. So on day one you would start out with how to think about your growth strategy and how to like pull out the correct KPIs for your business. How to even define your funnel. On day two it would be old school acquisition, so SEO, content marketing, email, all the things that work.

Day three would be new school acquisition, which is all the new channels. So it would be like Pinterest and YouTube, and Instagram. And then, day four would be some of the newer technologies as well like remarketing, how to build our sales team. So we would move into more the B2B sector. How to get leads, how to scrape the Internets for all the information that you needed to grow. And then day five would be covering how to put that to work and how to scale that and how to build a growth team.

Peter: Now, at 500 you're working with pretty early stage startups.

Tammy: Yes.

Peter: At Heavybit we're sort of blessed in that while we've got a wide range of products, a lot of the go-to markets are fairly analogous. We're all going to market through developers. And I imagine that when we are talking to accommodate that stage, just figuring out which channels to explore, is a task in andof itself. How do you determine where to start when you're building a marketing program?

Tammy: Well, the first place to start is kind of just framework and mindset.

You just want to go through rapid experiments quickly, so we recommended going through 30 experiments per week.

Yeah, that rapid. To just go down the list and start trying things because everybody's business, even in the developer world, everybody's business is unique. Everyone has a segmented audience in, for instance, the developer world and different channels & subchannels are going to work for different people. And you've got to get through those channels. Channel being one of them, but also making sure that you have the proper infrastructure set up.

A lot of these companies, and I'm sure for the Heavybit developer audience too, is just that email. Simple emails, simple drip campaigns when you want to put them through a 30-day trip campaign to educate your users to have evergreen content that educate your users. That's super valuable. Every business needs that, no matter if you're B2B, if you're a consumer, if you're enterprise, everybody needs that. Everybody has to make sure that just that baseline infrastructure is in place. You're smiling.

Peter: I'm smiling because I'd signed up for tons of products just to see what that initial experience was like. And more often than not I sort of wince at the onboarding flow. Why do so many companies get this wrong?

Tammy: You know, I think it's because they're scared. Most entrepreneurs are founders, they come to me and they're like, "Oh, what happens "if I piss people off?" Then you don't need to be in business because, guess what? You're going to have to piss people off. You know, people ask me "What happens if I'm emailing them too much?" Well, the only way to find that out is if there is a spike in unsubscribes.

You just have to be okay with, hey, there's going to be a baseline metric for unsubscribes, so you know, every email that you send out, you might have like one to two percent unsubscribe rate. But if you increase the frequency and it goes up to like five to seven percent or five and above, then you know you've pissed somebody off. So you can scale it back down.

But you've got to at least piss somebody off a little bit just to know what frequency or velocity they want to be engaged with.

Peter: Sure, yeah, you've got to find that edge. What are some other common mistakes that you see early stage companies making in marketing?

Tammy: Alright, so often times, if someone has an idea they'll build out the product first and then test and see if the users want the product. We encourage people to do things like smoke testing, where you kind of just put up a landing page and pretend like you have the product, but you don't really. And see if people will even click on it or engage with it in some way to see if there's interest.

Peter: Sure.

Tammy: So yeah, kind of just building something, a facade of something first and seeing if there's an engagement with it before actually building the product. Because you can save a lot of time and resources. Not to link things that people don't want. And focusing your energy on things that people do want.

Peter: I want to go back to the transition to 500. I've talked to a bunch of people about this sort of pivotal moment in their career, where they stop being an operator and they start being more of a coach, mentor, investor.

Tammy: Yeah.

Peter: What was that like for you?

Tammy: It was great, it was a great experience being at 500, because they had such a broad portfolio in different regions. They're probably the largest venture capital firm globally in terms of investment reach because they have people on the ground and in the Middle East, and Asia, and Korea, in Vietnam and Europe. You know, they're just global.

So it was really interesting because I got to see what made a good founder and what didn't. And as an operator, you kind of self-reflect and you're like "wow, I could have done that better". Or "yeah, I was okay at that." That was an invaluable experience.

Peter: What makes a good founder?

Tammy: It really depends on your role. So, if you're a CEO, then probably focusing more on investor relations.

I think for a traditional CEO it would be investor relations 60% of your time and then, 40% is leading the team.

I guess I didn't see that before going in there. Always keeping your investors updated. So they can help, because they're invested in you so they can help you. And I think founders probably just lose sight of that. That investors are there to help. So if you're a developer like CTOs, so that's like a completely different thing, right? I guess at different stages you're a different, you need to be a different role.

So if you're just a one, you have one co-founder that's a technical person and one CEO, you're kind of like doing everything. But a good founder that is technical, he can't be tied up solely on coding the product, he actually needs to be recruiting. That's his job, just go get more engineers. I've seen that one, that mistake as well. You know, people like the technical founder being too, you know, focused on the product instead of trying to build the team.

Peter: We certainly see that here, you know, at Heavybit we have a lot of very technical co-founders and their roles change quite a bit as their companies grow they have to move away from the code base and start to worry more about investor relations and recruiting and general management and strategy.

And it's often a challenge for them because coding is something that's very comfortable to them, they can solve immediate tractable problems. What are some ways that you get founders to swim outside their comfort zones and start dealing with the bigger, harder problems that they're less familiar with?

Tammy: I guess just coaching them, educating them, right? Giving them the information that they need to be able to execute what they need to outside of their comfort zone. And then also, what works is comparing them, as well as having them all together. Probably how it is here at Heavybit, you can compare each other in a cohort and say, "hey, like at this stage you should be at this size and why don't you ask your friend over there how they did it." A lot of that peer pressure.

Peter: Sure, that 500, I mean, that's such a big program. How do you allow smaller communities to form? How do you get that benchmarking to happen?

Tammy: Well, at 500, as of late, they have vertical focused programs, so there's a B2B focus program, there's a fintech focus program, there's a consumer focused program. So they would go into those vertical cohorts. It worked, it's good, it's kind of like you're verticalized here. Developer world.

Peter: So far so good. What do you like as a coach?

Tammy: I actually love, just getting in and getting my hands dirty and most often ripping out analytics, tracking code, and reinstrumenting it and getting that aha moment from the founders. Like, "oh my god, great! Like, we grew 30% since the last time we've seen you, that's great." 30% week over week, I mean.

Peter: Awesome.

Tammy: Or month over month. Or 20% you know. Whatever that metric is for your company. Like when I come back and they say like, I've improved from the previous week, that's fantastic.

Peter: Sure, is there sort of a standard Tammy tool chain?

Tammy: Oh yeah.

Peter: What's in the box?

Tammy: Oh yeah, got lots of templates and frameworks. There's like a growth experiment framework, which is that pipeline of 30 experiments that you should do, like, what do you need to do? What are the outcomes? How much did it move the needle via percentage points? That's one framework.

Another one would be, does the content and email marketing formula framework. So when you're communicating with people, there's eight psychological triggers that you can trigger to engage with your audience in making sure that you pick one of them in the body of your content. And make sure that you have a call to action at the end of your content in an attention grabbing headline. All of this is in a template.

Peter: How can our listeners steal these frameworks.

Tammy: It's actually public at startupmarketing.tammycamp.com.

Peter: Awesome. Awesome, we'll post a link to that. So I want to move forward in time a little bit. You spent two years at 500.

Tammy: That's right.

Peter: You built Marketing Hell Week, you invested in a bunch of companies, you coach a lot of folks, and at some point, you jump to NFX.

Tammy: That's right. I had a baby.

Peter: You had a baby, yeah! Congratulations!

Tammy: Thank you.

Peter: Left out that critical life moment.

Tammy: Well, you know, sometimes when you have like these big life events, you, you know, a lot of change comes.

Peter: Yeah sure.

Tammy: Yeah, that's a good time to change, right? You're changing your whole life, you might as well just stir your career in there with it.

Peter: Yeah, totally. So the baby happened. You took some time off.

Tammy: Yeah.

Peter: Ah, reasonable. Yeah, okay. And then when you started working again, you found yourself over at NFX.

Tammy: That's right.

Peter: Why NFX?

Tammy: Because, they're amazing! So I hosted a lot of people at Marketing Hell Week. I've been doing this for a long time so I had invited James Currier to one of our Marketing Hell Weeks and he did a Fireside chat with Dave McClure. You can actually find this Fireside chat on YouTube. You should watch it. It was mind blowing for me at the time. They are having discussions I was like, "wow, this guy is on a whole other level."

I was thinking to myself, I was like, I would really like to work with that guy one day. Because he really knows his shit. And so, I made a list of people who I wanted to work with after I had my baby and it was only a few people and I reached out to him and he was just like, "Come on." I was like "okay, here I come."

Peter: What was so inspiring? What did you like about him?

Tammy: He had really thought through network effects. At 500, it was very much the AARRR metrics. So it's acquisition, activation, referral, retention and revenue. So those are all the growth metrics that kind of measure a company's success in terms of growth, right?

And James, he came in and he was talking about network effects, which was in my opinion, just another layer deeper into growth. So just talking about, for example, closing loops. So for example, we'll take Instagram. In the early days, to form a habit, you actually have to have, what is it? Serotonin.

Peter: Is it serotonin? Serotonin or dopamine.

Tammy: It's dopamine. So if you're a user on Instagram and you had somebody follow you, you would get an email. And then, every time you would follow or comment on another person, you would get a notification about them. So it was just a close loop of virality, right? You know,

Once you have that loop closed, it's kind of infinite. It's infinite in the amount of times that a user will engage with your product. And so building those into your product is quite fascinating because it actually brings your level deeper into growth, because that's what you want to achieve, you want to achieve habits.

So thinking about those network effects and building them into your product so you can have your user feel good about them. Because that's what it is, you're building a product that solves a problem for them or making them feel good, like that's the point, right? And just kind of elevating that.

Peter: Now, my understanding of NFX is that you're not just looking for network effects, you're looking for multi-dimensional networks.

Tammy: You were saying marketplaces.

Peter: I said market places. You use the word marketplace?

Tammy: We do, there's like multiple marketplaces. That's actually one type of network effect is a marketplace. So they did an analysis of all of the types of companies that had network effects in their business in terms of technology and over 60% of them had them on the NASDAQ. So if you think of Google, right? They're a huge company and what drives their business is the ad network.

Everybody has Google AdWords or Google AdSense, you know, embedded in their sites. And so, the search function is their product, but the ad network is how they generate most of their revenue. So that is a network, an example of a network effects. If you think of like Uber, that's the marketplace that you were talking about earlier. You know, there's a closed loop. So if somebody's requesting a ride, the driver accepts and they go along and then it closes the loop.

Peter: So I think of market places as being sort of a double-edged sword. Because on the one hand, they can be very sticky, but on the other hand, you get these difficult startup costs right? There can be a little bit of a catch 22 as you try to get both parties involved.

Tammy: It depends on what vertical you're in where it depends on where you want to do supply side first or demand side first. That's what you're talking about, right?

Peter: Yeah.

Tammy: Like "oh, what should I focus on first?" Demand or supply.

If you focus on the demand side the supply side will fill because people want to make money.

Peter: What are some sort of classic NFX investments that demonstrate this sort of network effect you look for?

Tammy: Because the fund is new, I'll speak to the partner's angel investments so it would be Lyft, DoorDash, Poshmark.

Peter: Cool, what do you love about these companies?

Tammy: Well, in these particular companies, they're actually bringing value to both the seller and then the user. Giving people jobs. I think that's very important in today's political climate.

Peter: Yeah, totally.

Tammy: It's a topic of concern, right?

Peter: Yeah.

Tammy: That's why our current president got elected, right? Because he promised them jobs.

Peter: Did your role change when you moved from 500 to NFX?

Tammy: It did, it did. I'm focused more, not so much on the entrepreneur side as of yet, I'm just really focused on the LP fundraise at the moment. And then doing a small amount of crypto-related investing and in research for the team.

Peter: Cool, I'd love to hear about both of those. You guys are raising a fund?

Tammy: That's right.

Peter: Are you willing to give us some details about what you're raising?

Tammy: I don't know if I can.

Peter: Yeah, that's fine. That's private stuff.

Tammy: I know. Everybody's just wants to know more about the ICO market anyways, right?

Peter: I do want to know more about the ICO market. You know, I'm interested in LP stuff because it can be such as sort of a mysterious relationship. I think especially for folks that are beginning their career in venture.

Tammy: Oh, I see.

Peter: There's this secondary layer there that's just totally foreign to folks.

Tammy: Okay. I can actually talk about that. I actually help 500 with their process as well.

Peter: So tell me a little bit about that. Maybe actually for the listeners you just start by saying like what an LP is and how they fit into the venture business system.

Tammy: Okay.

An LP is a person that gives money to the venture fund or invests in the venture fund so they can get a return on their investment. It's typically a 10-year period where they have to lock up their money. It's usually from endowments, it's even sovereign well funds, it's family offices.

So for example, let's take Mark Cuban. Everybody knows Mark Cuban, right? So Mark Cuban is an active investor, but he's a billionaire, he probably has a family office too, right? So you know, he wants to put more money to work. And so, venture capital is in this tiny, tiny sliver of like the asset class of private equity. Tiny sliver.

So most of these people only invest like two percent of their entire pot of money into venture funds because it's a very risky asset class. There's actually more venture funds that show poor returns than good ones. Yeah, that's why a lot of them go out of business.

Peter: It's short lived.

Tammy: It is.

Peter: A cycle yeah, it's something we don't talk about a lot. There's actually sort of a high mortality rate.

Tammy: There is. I think it's like 60%, it's high. Yeah, 60% don't make it.

Peter: So, LPs are looking to find the right 40% that are going to get the returns. What sort of returns are LPs looking for out of venture funds?

Tammy: You know, that's a good question. There's a baseline which is like "I just want my money back." It's kind of like investing in startups like the investors, the venture capitalists are like, you know, if I just get my money back, sometimes that a good outcome. One X, two X, that's a mediocre outcome. Like three X is good, four and five X is great, and then everything above fixe X is just like hey, it's stellar.

Peter: Sure. So, LPs are looking for venture funds that are going to get them the best bank for their buck. What are you looking for in your LPs?

Tammy: A long relationship and somebody that trusts us to make the right decisions. Yeah. And probably their network as well. It would be great if they had an extended network. It's kind of like everything that you would want in a venture investor, right? You want them to be supportive and be there for you when the going gets rough and then you know, be there to celebrate with you when things are great and then to open up doors when you are in need of that introduction.

Peter: You mentioned a handful of different flavors of LP, charitable foundations, family offices, endowments, pension funds. How do you pick which of these groups to target?

Tammy: Ideally you would want, probably all of them. You would probably want to have an equal amount of all of them in your fund to have that balance. It's actually called fund construction.

Peter: Fund construction? Tell me more about fund construction.

Tammy: Well yeah, that's exactly what it is, it's like, you know how many people you want say three family offices, three endowments, three pensions, and three sovereign wealth. It's good to diversify in fund of funds as well.

Peter: Why is that diversity important? What do you get from that?

Tammy: For example, if you have a fund of funds, what happens if they're having trouble raising their next fund? So that could be, you know, a negative signal if they don't come in the second or third fund. Because you know, they dropped out. And you know, it might scare other people away. Or it just, you know, may make it harder for whatever reason to fill that position.

That's one reason. Let's see, sovereign wealth funds. We've seen Greece and other countries in the EU kind of have this debt and you know, sovereign wealth can disappear as well. It's just being smart and diversifying.

They always say diversify your investment portfolio. So you want to diversify your LP portfolio too.

Peter: Sure, okay.

Tammy: Right?

Peter: Yeah.

Tammy: No, you're not seeing it are you? You're like not convinced.

Peter: When we talk about diversifying an investment portfolio, I can draw you a risk return curve and say, alright, here's a sort of returns I expect for this asset.

Tammy: But I just did that for you, I was like oh, this is why these different types of LPs are risky.

Peter: So you're really just trying to mitigate a risk from diversifying.

Tammy: Yeah, exactly.

Peter: You said that ones that you're looking for is help from your LPs.

Tammy: That too.

Peter: What sort of support do LPs provide for venture capitalists?

Tammy: Introductions to other LPs.

Peter: It's a network effect.

Tammy: I know, right? It's kind of like venture capitalists. "Hey, you've just led my round, why don't you introduce me to your other VC friends to help me fill the round"? Same thing.

Peter: Got it.

Tammy: Isn't it funny, it's like LPs and then, VC, and then entrepreneurs.

I always compare it to the San Francisco 49rs. You have the owners, the coaches, and then you have the players. So the LPs are like the owners of the football team and then the venture capitalists are like the coaches, and then the players are the founders.

Peter: I love it. We're going to make jerseys for all our founders. Any learnings that you want to share about VC LP relationship or how to raise a fund?

Tammy: Well, you just have to be patient. People are entrusting you with millions of dollars and they need to trust you, so it takes a while. It is like an enterprise sales cycle. Sometimes like these things take you know, two, three, four years to actually solidify in terms of a relationship.

Peter: Cool.

Tammy: Yeah, it's kind of like dating.

Peter: I hope not. I want to talk about the thing everyone's talking about. Why are you laughing?

Tammy: Because you have like a big smile on your face.

Peter: I'm bracing myself of the ICO discussion.

Tammy: Oh no.

Peter: I'm readying myself mentally and spiritually from a blockchain discussion. I feel sort of saturated on blockchain, to be honest. It's been filling up my news feeds, all my friends are talking about it, and you just said you used to head up the blockchaining investment arm of NFX, is that a fair description?

Tammy: I am right now probably doing the most research, but I wouldn't call me the head.

Peter: The words trading desk were used. Okay, so start talking about that. Why is NFX interested in blockchain, why do we care about this?

Tammy: I think that blockchain like technologies seem to becoming more and more popular in the way that we distribute applications and information in value. Every investor should be looking at this. There's been a tremendous amount of value that's happened on the alternative asset class of crypto currency. Or crypto assets, I can't even call it currencies anymore, you know, there's assets there now.

When I was at Stellar, remember, the Bitcoin market cap was at one billion. And that's like if you were to talk to an institution like Bank of America, they move like one trillion dollars a day, so like, a billion dollars is just a rounding error for them, so they're like ha, ha, ha, but they were following and thinking, this will go away, this is a fad. Because it's just a rounding error to us.

And now it's Bitcoin specifically is at 44 billion. The entire asset, like crypto asset is at 100 billion. So it doesn't look like it's going to be going away anytime soon and it seems like it's just getting hotter and hotter.

Peter: Sure, why is this interesting for NFX? I'm assuming that if you wanted to, you could continue making traditional equity or debt based investments and build a totally successful portfolio. So why crypto at all?

Tammy: I just want to clarify that, everybody on the NFX team is actually individually investing in this. We're just testing to see if we would want to include it in our LP base. So we're actually playing with our own money to make sure that we pick right and that we have the returns that we need for future funds. Let's talk about different protocols.

Peter: Sure.

Tammy: Alright. There are a lot of different protocols. There's Bitcoin, there's Ethyrium, there's Ripple, there's Stellar, and I think a lot of developers are trying to decide on what to focus on to build applications on top of. I think that if you're thinking about building on top of these platforms, I would seriously look at all of them. Because I feel like a lot of people are rushing on to the blockchain.

I'll probably make a lot of people upset by saying this, but

Blockchain is just slow. It's kind of like Friendster. And then Ethereum is like MySpace. I think Stellar is actually going to be the winner and it's going to be the Facebook.

And here's why. Let's just talk about protocols and transactions for a second. When I send a Bitcoin across the network, it takes 15 to 30 minutes to get six confirmations over the network to confirm the transaction. So 15 to 30 minutes?

Can you imagine standing at the checkout line at your local Safeway and then trying to swipe your credit card and standing there for 15 to 30 minutes to wait for that transaction to complete? It's a long time, it's just inefficient. So the transaction limit per Bitcoin on the blockchain is six transactions per second. So, Ethyrium, it takes slightly less time, they're like 10 minutes to confirm on the network.

Ethyrium was just down today because there were so many people trying to buy on it, so the whole network was locked up. Because it's built on top of the blockchain an already inefficient protocol that was built over 15 years ago.

Peter: Hold on, I want to get some clarifying definitions on the table here. You used some words that I don't know we're all familiar with. You said there are a bunch of new protocols coming out and developers are building applications on top of these protocols.

Tammy: That's right.

Peter: What do you mean by protocol in this context?

Tammy: So protocols, so think of like SMTP, that's a protocol. Everyone knows that protocol is like what email runs off of. Nobody really talks about SMTP, but they talk about Gmail. Gmail is the application that Google has built on top of SMTP and it's like in real time, right? I send you an email and you get it in a couple of seconds. That's how fast it should be.

We shouldn't really be talking about the protocol. Protocol is just infrastructure. It just needs to be fast, it needs to be the pipes underneath the building. That's what protocol needs to be, or should be, or is, that's what it is. Much like SMTP, the crypto currencies and blockchain-like technologies need to move as seamlessly as that. Think of how many people are on the SMTP protocol. The entire world. Even more people than Facebook, right?

Peter: Sure. So you've got this great example of protocol you said. SMTP is a protocol about how we message each other across the internet. How we transform little lossey packets of information into very reliable communication.

Tammy: That's right.

Peter: And now, people are not only building new protocols, but are monetizing them.

Tammy: That's right.

Peter: Tell me about how blockchain allows folks to monetize protocols.

Tammy: Blockchain-like technologies allow people to either issue their own currency or issue tokens that have value. As of late, we've been seeing a lot of token sales in the market, specifically the Civic ICO and then also the Bancor ICO. They happened two weeks ago and I participated in them. That was a vastly different experience, with each one. One, ended up being a great experience. The other one, not so great. Both of them haven't started trading yet, so we'll see how they go. It was definitely a learning experience.

Peter: Can you walk me through one of these ICOs?

Tammy: Let's talk about Civic, because I feel that they executed very well in terms of how they handle the ICO. So Civic is building an identity management network. For example, if you want to open up a bank account, people have to verify your identity. And their network would help you verify their identity for that bank.

A lot of banks have like KYC, which is Know Your Customer compliance laws for the U.S. governments and also the anti money laundering laws When you're opening up bank accounts. So KYC and AML, they will be able to help you get those financial accounts open more quickly through a network.

Peter: Cool, how do they make money off of this?

Tammy: Well, they did a token sale for $33 million. They divvied up the total amount of tokens and they only put 33% of those tokens on sale to the public, so I guess that's why they did 33%. So 33% of the tokens were sold, 33% of the tokens were issued to the founders or the people who work at Civic. So that would be their grant or, it would be similar to like an equity grant.

And then the other 33% was for the community. So for example, in the developer community you would have these hack-a-thons and you would need prize money. So they would issue the tokens as prize money. And then one percent went to all of the legal fees. So that's how they divvied it up. If you release 33% and you cap it at 33 million, if the value of the token goes up, then the value of your marketing budget goes up for all those hack-a-thons.

The value of your tokens that you issue to employees or the founders go up and it's a liquid market. I've been looking at these token sales and they have like $12 million a day of liquidity on them.

Peter: Let's close the loop here, step one, Civic writes a white paper to describe this new protocol for identity management.

Tammy: That's right.

Peter: Step two, they sell a bunch of tokens, they exchange tokens for other currency. They issue tokens and they get money back.

Tammy: That's right.

Peter: How do the tokens then feed back into identity management? What can I do with a token?

Tammy: So there's two different things, the token was just a way to pay for things. It was an instrument to let everybody participate and to increase the value of the tokens for the people who held them and for the community. So it's two different things as a means of raising funds versus actually doing the identity management. They're two separate things. It's kind of like the blockchain in Bitcoin. The blockchain does its own things, because it's a protocol, and the Bitcoin is just a currency.

Peter: So, who is buying these tokens? You bought some.

Tammy: Speculators and investors, hopefully I'm the latter. And people in the crypto currency community. People who have made a lot of money in Ethyrium and in Bitcoin and iCoin and Ripple and Stellar, you know, they want to diversify and they're pouring their money into these, these new assets.

Peter: What's the relationship between the Civic token and the identity management protocol that they're building?

Tammy: Really nothing.

Peter: Nothing?

Tammy: No, it's a token that increases or decreases in value and then the management system is a decentralized identity management system. They're two completely separate things.

Peter: What pays for the running of the management system?

Tammy: The tokens.

Peter: Maybe I'm inappropriately or trying to lead the witness here. How do I exchange a token for some identity management?

Tammy: There are third parties that verify your identity. They're probably rewarded with those tokens that do the work.

Peter: Yeah.

Tammy: Is that what you mean?

Peter: Yeah, I sort of wanted to draw the complete ecosystem of like paying for the work and the tokens and the ICO.

Tammy: Yeah, they're funding the community with that 33% community. Like all the people that complete the work in terms of identity verification, that goes to them, you know, very small fraction. Imagine it as, "hey, I'm the Bitcoin miner and I'm one of the people that confirmed that transaction." Same thing. And then, just other marketing initiatives like hack-a-thons and things like that.

Peter: Cool.

Tammy: Content, content and content.

Peter: You wrote this great Medium article on why the Civic ICO was successful. ICO, initial coin offering sale of these tokens.

Tammy: That's right.

Peter: What are some of the characteristics that made this a well executed ICO?

Tammy: Well, there are a number of things that Civic did to make it successful and kind of differentiated in the market. One, they wrote a white paper that everybody could understand. Usually when you write a white paper, it's geared toward the developer community and they kind of like to call that green paper. So a green paper that everybody could understand, including your mother, something that they would read and they can understand.

Making your ICO white paper accessible and readable to those audiences actually increases your audience size, therefore, increases the people that want to be on your platform.

That was step number one. Step number two, they actually built a product first. That's different. Usually when you have a token sale, it's like, "oh, I have an idea, this is my vision." They built the identity verification platform first. The first version of the product was similar to Facebook Connect and people who are going to be participating in the public crowdsale tomorrow actually have to download the app and use it to purchase the tokens. So dogfooding, that's number three.

Peter: Cool. Tammy, thank you so much for joining us. Before we go, any words of wisdom for folks beginning their career in venture? Things you wish you knew going into this?

Tammy: I think that having a diverse background, operating background, is very invaluable to founders. And then your own sense of picking what's good and what's bad. Basically not having the traditional like business school background isn't always necessary. Like operating companies is really great as well.

Peter: Cool, how can people find you?

Tammy: You find me at Twitter @TammyCamp or you can email me at tammy@tammycamp.com.

Peter: Easy, thank you so much, it's been a real pleasure.

Tammy: Thank you, Peter.