Crypto startups — fresh off a mind-boggling bull run — are preparing for the next phase of life where the mere mention of "NFT," "DAO" or "DeFi" may not tempt investors quite as much as before. The breed of crypto startups raising now are looking to double down on scoring more traditional customers rather than building up a self-referential crypto customer base. These startups are being pushed to distill the lessons of the bull run and find truth in the former frothiness.
Web3 startup Hang is one such startup looking to build up a client base of brands and help them leverage NFTs to replace their existing membership and loyalty programs. The startup hopes that by leveraging the blockchain, users will be able to buy into and sell elite membership status, finding the market value for the perks offered by loyalty programs and build a closer relationship with the brands they frequent.
"By leveraging NFTs and the blockchain there are far better ways to solve real problems for brands," CEO Matt Smolin tells TechCrunch. "We truly see this as a new way to shepherd in a new relationship between consumers and brands."
Smolin's startup has just banked $16 million in new Series A funding from crypto venture firm Paradigm. Other investors include Tiger Global, Good Friends, Kevin Durant’s Thirty Five Ventures, MrBeast’s Night Ventures and Shrug Capital, among others. Some early customers of the brand include Budweiser, Bleacher Report, Pinkberry and music festival group Superfly.
Loyalty programs existed long before blockchains, but Smolin believes that adding a liquid market for the right to enter or exit a brand's loyalty perks is better for all parties involved. Rather than endow each brand with their own cryptocurrency-backed points, Hang's effort aims to give users NFTs that they can level up by being a fan. By engaging with the brand, buying stuff or participating in events, users can upgrade the status of their membership NFT, which they could eventually go on to sell to someone else with the perks they receive attached to it.
Smolin references the great lengths users go to at the end of the year to reach the next level of airline status as a way to signify how they price the value of the service; he wonders whether more services could build this relationship and create better membership programs for users. The reality is that most brand loyalty programs aren't that great and often just offer a way to more directly spam a user through communications. Smolin believes that rising customer acquisition costs are going to push brands to rethink their fundamental approach and might push them toward taking a risk on NFTs.