The crypto mullet: web2 in front, web3 in back

June 11, 2022

The next wave of $1B+ crypto companies will disrupt incumbents by keeping an existing consumer experience in web2 while rebuilding its back office in web3.

Disruptive technologies create transformative business models when they enable a 10x better consumer experience (ie, Netflix with streaming tech vs. going to Blockbuster) or a 10x cheaper back office (ie, Instacart with mobile tech vs operating a grocery store).

Today, the blockchain is arguably a 10x+ worse consumer experience for anyone that hasn’t already been red pilled, but it can be 10x+ better in cases that rely on incentive alignment between large groups of people who don’t know or trust each other. This is the crypto mullet’s opportunity: web2 consumer products upfront, combined web3 technologies in the back.

Crypto mullet’s customers don’t think about wallets, tokens or crypto. Instead, they log in with their email addresses, pay with their credit cards and access the company’s services through a normal web browser/app. Crypto mullet’s back offices, however, are decentralized and governed using thoughtful tokenomics and encoded via smart contract. They weave together NFTs and FTs to align incentives through through profit sharing, shared upside, governance, etc.

Braintrust, VectorDAO and MetaFactory are great examples of the crypto mullet model in action. Braintrust is disrupting the talent agency model by combining a Toptal inspired consumer product experience with a service DAO on the back end, and Vector DAO is doing something similar but for the design agency market. Instead of building C Corps with 10,000s of staff, these companies are managing their supply chain via a DAO. MetaFactory is a decentralized clothing brand whose apparel is designed by the community and whose creators and buyers get ownership (ie, tokens) in the DAO to help drive future decisions.

Generally speaking, I think there are two types of business model that are most likely to be disrupted by crypto mullets:

1. Service businesses, movie studios, music labels and news networks that employ 10,000s of people doing specialized, project-based work within teams.
2. Fashion, CPG, and marketplace businesses that rely on supply chains or networks of many vendors, manufacturers or sellers for the products they product/sell.

Like startups, crypto mullets must start by focusing on a single, underserved market segment and then expanding into others over time. This is critical so these companies can stay small and off-the-radar to start with before needing to compete head-to-head with existing incumbents.

For example, a crypto mullet disrupting CPG could start with a wine of the month club, or a movie studio could start out by creating clever video ads for a small brands. Similar to any startup, a crypto mullet’s core advantage is its speed, so picking the right first small market is critical so they can stay focused and move quickly.

What are some of your favorite examples of crypto mullets in the wild? Share them with me on Twitter!