Unstoppable Domains is one of the freshest unicorns (companies valued at over $1 billion) among blockchain projects in the world.
The company was founded in Kyiv by 3 American and Ukrainian entrepreneurs in 2019. Its technical team is led by CTO Bogdan Gusev, a Ukrainian, and is made up almost entirely of Ukrainians. Some of them keep working from Kyiv, where the company runs an office in one of the city's coworking spaces.
Last June, the company sold 6.5% stake for $65 million. Its core business is the registration of WEB3 domains (web3 refers to the concept of developing a decentralised blockchain-based internet) that can be used to accept crypto payments and for online identification. And, according to the project team, for a wide range of other services.
The very term WEB3 has not yet become entrenched (it is generally accepted that the era of web2.0 is underway now). As Bloomberg defines it, "this approach involves embedding financial assets, in the form of tokens, in any online activity."
Speaking to Mind, the company's co-founder Bradley Kam told us how WEB3 domains work, as well as about industry prospects, challenges, competitors, his Ukrainian team, and why the crypto industry is unable to work with regulators.
As a reminder, the first over the past year and a half investment club of the Ukrainian Venture Capital Association supported by Mind.ua is going to take place on 1 June. The event is free for Mind subscribers. Please register at [email protected].
– Last year unstoppable domain acquired 65 million investments, and it is the biggest venture deal in Ukraine. And one of your co-founders is from Ukraine. How do you feel connected with Ukraine?
– We have one co-founder, who comes from Ukraine, CTO Bogdan Gusev, he is head of the blockchain team. Along with another co-founder, CEO Matthew Gould we have been working together for more than 10 years. The previous company we started was Talkable. Bogdan Gusev was the CTO and we started hiring a team in Ukraine in 2012. The first time I travelled to Ukraine was in 2014. So I had no real connection with the country until then. I think some of my ancestors rom like 100 years ago were from Ukraine.
But I didn't have an emotional connection to it until visiting it. And what I found was one of the most amazing startup ecosystems and startup cities I've ever seen, Kyiv, and I just became convinced that this was the place to build technical teams.
And I've built two companies there with technical teams, and Talkable actually had a business team too. So two thirds of that company is based in Ukraine. If I ever started another company, again, I'll do the same thing and build it in Ukraine.
I actually can't imagine doing anything different. I have invested a lot of my career time in building relationships and getting to know the Ukrainian startup ecosystem and travelled to the country a dozen times. So that's my connection.
– When have you been here for the last time?
– Right before COVID, in October 2019. We were actually planning to do our company off site in Kyiv summer of 2022. That was going to be the plan after COVID. So hopefully we can organize it next year.
– Why did you decide to leave Talkable and start UD?
– Talkable is a great company. And it's still growing. But I had been following crypto since 2013, when I moved to San Francisco, and I just been reading about it, going to meetups. I became a little obsessed, which I think is a common trait in crypto industry. I couldn't imagine not doing something there.
So I decided to step back and start working on crypto projects. And Matt, our CEO, came up with this idea at the end of 2017. He and I started talking about it. And I just became convinced that building identity on the blockchain would be a big part of the future. So I just decided that it was time to work on crypto.
– What about the office in Ukraine now? Do you have people working in Kyiv for unstoppable domains?
– Yeah, we do still have a space in Coworking Hub lift 99. We had it before COVID. And then we got it again. I think there's a couple of people that are still going into the office. It was always optional. So we've always been remote first.
We have three different engineering teams and our blockchain engineering team is the one that's based in this space in Ukraine. So people who work for that team are Ukrainians, regardless of where they are living now. And now people are a little bit more spread out in other places in Europe, but everybody on that team is Ukrainian.
– What's the uniqueness of your idea? let's try to make a kind of elevator pitch. try to explain what is it.
– We're building your own digital identity. And so we have built, what we call web3 domain names, and NFT’s and they're stored in your crypto wallet, and you own them. Unstoppable can't take them away from you. Other companies can take them away from you. You can use your username on the internet.
– Why is it so unique?
We were building the platform for identity on the blockchain to work. And so you need to build the domain name system. Then you need to build all of this other tools for users to actually be able to use the domains and for apps to be able to support the domains.
We built the first version of the company with a common registrar. And then we realised that there were so many tools missing.
So we decided to build our own technology from scratch. And now we're starting to support other naming systems like GoDaddy, our goal is to be the platform for the entire space. So we just believe there's going to be hundreds or thousands of different naming systems. And we want to be the tech and tooling for all of that.
– But you can’t use this domains from web browser?
– It's not primarily used for websites. Traditional domain names are for businesses with web3 domain names are for consumers. So the main use case is payments. You can send me money to brad.crypto, it's kind of like a Venmo (Venmo is an American mobile payment service founded in 2009 and owned by PayPal since 2013. Venmo was aimed at friends and family who wish to split bills, e.g. for movies, dinner, rent, or event tickets – Mind) handle payments.
You can also use domain to log into apps. And then you have a digital profile. So it's a little bit more decentralised. You can build website here. But consumers don't really like personal websites, they are mostly for businesses.
– So it could work like Paypal, if you want to send money, just type domain instead of email?
– Sort of.. But what it really is, is that you used to have dozens of different usernames for all of these different features. Now you can have one, so you used to have one handle for email, and then another one for payments. And then you've got something else for logging in. That's usually your Facebook. And then you've got, you know, 10 of each of those. Now, you can just have one that works across all of those things.
– But this is the same as Google login works with different apps. And now you need to make different companies, wallets, websites, medias also to connect to your system through API?
– This is the biggest part of the company. In order for domain names to work, apps have to support it. So we've spent the past five years getting about I think 1000 apps now to integrate and use this identity standard. Writing smart contracts on the blockchain is difficult. But the really hard thing is then getting all of these apps to integrate with that, and have that all work together. And that's the secret sauce.
– Do you need to own the endings of domain to create such a platform? And how many do you own by now?
– We have 10, what we would call like generic: .crypto .NFT, .wallet, . x that are really for anybody. And then we've got some branded ones as well. So we have .blockchain with blockchain.com .clever with clever wallet. So there's kind of two categories. There're these ones that are special for brands. And this is very similar to what happened with email in the 1990s, where every company wanted email on their branded domain.
And then all of a sudden that brand shows up even in your competitors apps, because the system is interoperable. Email is interoperable. The same thing is true for for web3 domains. So if I have a .coinbase that's going to show up in finance.
– Is it difficult to get a domain ending for web3? And how much did it cost to you?
– Not difficult. In the traditional domain name world, there's ICANN and you go through a bidding system, and then you can buy TLDs. In the Web3 world, there is no governing body, there is nobody to ask for permission.
And assuming it doesn't exist prior than you can flame by going live and getting usage in the market, similar to any brand. Trademark, any kind of trademark brand IP process. So that's how it works. It's very early days yet.
In 1990's, when DNS started, there had not been any ICANN yet. And what happened was exactly what's happening now, companies started launching TLDs, building communities around them and convincing apps to support them. And that made them exist. And like .com, for example, they made a deal with Netscape very early on to get .com to work inside of the browser. And that's how .com came into the browser.
It's the exact same thing, again, 30 years later. And yeah, it's a kind of a weird world that there is no regulator, but I think the community is going to self-regulate. So we've created a group called the Web3 domain Alliance, which is an industry group for us plus other naming systems, our competitors, and we're building and setting up policies and working together to find ways to avoid naming collisions, because that's bad for all users and apps.
And we hope that the community can essentially work it out through negotiations and through mediation, rather than having to go and have a regulator one day like ICANN that moves really slow.
– So you didn’t spend a lot to get these domains?
– I think we spent tens of millions to get them. But the incremental cost is relatively low, the main cost is the technology and the integrations. Because if you don't have integrations, then you don't have a TLD. Because no one is using it, and it can't work anywhere. So that's the cost.
– Why do you think nobody uses Web3 yet to host web sites that needs to be independent and unregulated (from media in dictatorial countries to criminals or phishing)?
– Nowadays it's so easy to block them if you want to. You can block them from IP address level, or you could block them from the browser level, or from the internet service provider level. If you're a government and you want to stop a website, you can take it down like any traditional domain name.
So it's not a good tool for censorship-resistant content today. Maybe in the future, when all of these other pieces of tech are truly decentralised and everyone's getting satellite internet, not controlled by Elon or anybody, then maybe that would be a room where you could actually do it.
– What is your main business model? You sell standard and premium domains? Who sets the price for premium ones? Don’t you have any trademark regulation in Web three?
– We certainly do. The rules still exists. It doesn't matter if you say it's Web3 or not. And I think there's a lot of people in the crypto market that are realising that right now. Saying Web3 does not mean that you get to break rules. So we block domain names of brands, and make it only be registrable by those brands. You can write any kind of rules you want into your smart contract. So that is absolutely doable in a decentralised system. And anyone who says otherwise, it's just breaking the rules.
– How many disputes do you have by now?
– These are not quite disputes.We might happen to miss a brand name, like somebody's brand or a launch of a new product or something like that. And some squatter will go and grab it before we block it. And when that happens, there's not much we can do. Because the user owns it. So we basically just have to be good at getting the brands into our system before that happens. So that's the kind of the the cat-and-mouse game that we have to play.
– How much do you earn from selling premium domains?
– A domain starts from five bucks, lots of people buy, you know, just one or two, some people buy 10. There are domains that go all the way up to $25,000 apiece.
So it's very similar to traditional domains where like the most common words, or maybe terms related to finance or crypto, tend to be really desirable. Although, first names that are a little bit different from traditional domains might not be that big of a deal. But because this is for consumers, popular first names tend to be really desirable. But that is another category.
– Who sets price?
– We have a pricing algorithm that takes into account Web3 domain prices, sales, as well as traditional domain sales. We built a pricing model that's got really complex over the years, but it works.
– Can people resell their domains?
– Yes, they can. There is a secondary market.
– What are your future plans for developing UD? And what is more important for you, the road or the destination?
– The destination. Every user on the internet has a domain, and they use it as their digital identity online. So that's the goal. There are maybe four or five billion users on Facebook. That's the market. And we want everyone to be using domain as his or her username online.
I wouldn't say the goal is more important than the road to it. I think that we have been like a choice for startups. Do you want to go down a specific road? Or you don’t care? I think we've chosen to be very open minded about how it gets there. I'll give you an example. We thought that early on that financial institutions like PayPal and others would be the early adopters of our Tech because they need to move payments. They have this problem with usernames that don't work across apps.
Wouldn't it be great for all these payments, companies, if money could just flow across apps easily indeed just like emails do? Thus we thought that it was going to be the first wave of traditional companies. And it wound up with entertainment companies and specifically fashion companies, like Nike, LVMH and so on doing a lot of stuff with NFTs, and those companies seeking to do rewards with domain names and by giving their users Web3 wallets for the purpose of rewards.
So we were totally wrong about this. And we've been embracing it. Because I think for our market is unique in that we want you to use the domain name for hundreds of different things. We want this to just consume all of your internet activity.
And that is just such a massive goal, that we have to do it in pieces, and because there’s hundreds of different pieces, I think it's been hard to predict which of the three to five pieces were going to come first. And we don't actually care, as long as because the goal is everything: payments, identity, verification of your real identity for for example, financial services app, credit scores and all of this different stuff.
– How many consumers have you got by now?
– About 500,000
– And what are the top three countries?
– US is by far the most, UK and then Canada. So we're very focused on English North America, you know, for now. We plan to expand, we have already started doing some tests in Europe, some stuff in Southeast Asia.
– What about Ukraine?
– Ukraine as a market is not big enough all on its own. We will be looking at EU, as well as at the Chinese-speaking market, Southeast Asia. There’s a lot of, you know, sophisticated crypto folks. So that's another really good market with Singapore in the centre.
– Can you name some of your fierce competitors? I mean, not only in your market, but in general, like Google for example?
– GoDaddy. I think they were more likely to be a partner than a competitor. They're the biggest domain name company. And this is an innovation in domain names. So it's a very good place for them to play.
Coinbase. They like to go into almost every market in crypto, they like to try to build products across, they built marketplace, and tonnes of different stuff.
I think it's tough for those types of apps to compete with us because they need to work with their competitors. In order for the domain names to work you need, e.g. Binance to agree to support Coinbase as identity system, which is hard. So I think we have an advantage but such companies could build what we're building.
Twitter. They are actually getting pretty close, especially with the way they're verifying accounts and charging for verifying. And I think that's actually the Twitter verification is probably the coolest identity product on the market right now, besides Unstoppable.
Blue sky. They emerged from Twitter and are run by Jack Dorsey. And they are trying to do something even more similar to unstoppable, but they're trying to use.com domains. So they're using traditional domains instead of Web3 domains, but they're trying to build a lot of similar stuff.
So they're still small, but I think that's a very interesting competitor, because they say that I can do everything you're doing without a blockchain. And I don't think that's true. But it's a very interesting argument they make and in a lot of ways it's easier because there's more tools for.com domains.
– Tell us about your deal. How did you prepare for this investment round? Who did the due diligence? Can you tell us about the whole process of preparing for investment round?
– Yeah, that was a crazy experience. The most weird thing about it is that there's probably 100 companies that could have done a deal like ours, and you only need one, but you could get zero. You can either succeed and everything's great, or fail and everything's terrible. There's no middle ground in fundraising. It’s very intense process for that reason.
I guess we talked to 40 investment firms.
At that time crypto and Web3 was quite a buzzword. Every single investor wanted to do something in Web3. So it was very easy for people to get excited and start talking. But most of those people were not true believers. Once they got into it, they became just too conservative for most of the stuff. So we ended up getting into serious talks with two companies.
And they were the firms we had known for a long time and with whom we had personal relationships for several years, and we knew each other well. That made it easy and fast. And, you know, picking Panthera was also somewhat easy, because we knew Paul, the lead partner, for three yearsl. We didn't go through this process with a whole bunch of folks that we didn't know as well.
And we also wanted Panthera, the lead investor to be part of the company, because they have great relationships inside the crypto industry.
They were able to make just unbelievable number of intros and help us in our business development. So that was the idea. We've actually been decreasing spendings, rather than increasing since the funding round, but that's more because of the macro environment.
– So you didn't need to do additional due diligence, because you had personal relationship?
– Yeah. That's always been important for me. So had for Matt. We've been doing companies and businesses together for more than 20 years. And it's always been about trust and relationships. Like the fact that people do these massive deals with people that they just met a week ago, is actually very confusing to me.
I know, this is very common in startups, though I don't get it. For me, businesses are mostly about relationships. I want to work with people who are my friends, whom I like, I want to work with investors whom I like. It would be strange to do that with somebody you don't know.
– Could you tell us how did you spend money acquired after investment round? Did you invest in technology team or maybe took some cash out?
– Oh, no cash out. We try not to spend it. It's bumpy time in the economy, you know. So we try to save funds. I think we foresaw taking money as insurance in case the market goes down. And it did, you know, we actually closed that round in April of 2022. And the market did go down a lot after that. So that was good to take out an insurance policy.
Because as I mentioned, you know, getting integrations is the key, and it's easier to do that in a down market. So now that everybody is a little bit quieter, it's easier to do partnerships, and it's harder to do consumer marketing. So we're doing a lot less consumer marketing, and a lot more b2b partnerships as well. And those partnerships will pay off probably much more in the next up-market. So we're setting ourselves for when the down market ends.
– If you didn’t spend acquired money, where did you put or invest them? Did you locate any in Silicon Valley Bank?
– Not in Silicon Valley Bank, we're very lucky that we did not have money there. We use traditional big banks, because we're very conservative with the money. And we spend a little because we're making some bets on growing our partnerships right now, with Web2 companies. But in general, I think we've been trying to make it keep going for four or five years or whatever, until market picks up more.
– So, you are a crypto project that didn't invest into crypto?
– I can see us having some small amount of crypto in our treasury, I think that's actually common for crypto companies. But we're so conservative about this stuff. That's not our business, we're not investors. We're a technology company that's trying to build digital identity. Investing in crypto has nothing to do with our goals. So we just try to stay focused and just not get distracted by those things.
– What share of the company does belong to co-founders and what to investors?
– Just under 70% is owned by founders and employees. So we've been running a profitable business for most of our history, and we raised 7 million in the history of the company before that, and we got into some pretty big sales numbers. I generally don't believe that fundraising leads to revenue.
It leads to time, which can lead to revenue. But as for the money itself, I don't think it actually brings revenue.
And I think this is a sort of a story that Silicon Valley companies have been telling themselves and investors that the money is the thing that matters for growth. And I haven't experienced that so much. I think it's innovation that leads to the growth, like you come up with something new. That's an idea and it is not usually expensive
– So being unicorn, is it weird? Or is it inspiring?
– Valuation is somebody else's opinion of you. It's not your actual performance. I think it’s a nice feeling indeed when somebody gives you a compliment, saying you worth a unicorn. But that's not success itself.
Then you still have to go and win. What really matters is how you're actually doing. And it doesn't feel like a victory when you're in it, rather like an assignment. I have to go and make this company a $10 billion one, you know, this is what it feels.
– What is your personal strategy for exit?
– Exiting a company is a very strange concept, because on the one hand, it's good, right? Because you get liquidity. And on the other hand, you lose a company, and then you no longer have any future options. So I don't have a strong opinion on when or how it happens, I think that the longer you can grow independently, probably the better. I think if there's a reason why you feel like you can't grow any more on your own, that's a good reason to sell. But we don't have any specific plans to sell, I think our plan is IPO in two to four years, when the market comes back.
– You posted on LinkedIn a post “This unfortunate misunderstanding of how advocating for an industry in Washington works. You need to embrace all lawmakers, including the ones that disagree with you” about a month ago. What did you mean by that, do you agree or disagree with SEC which wants to equal tokens with assets and commodities?
– This is about what's happening in the political lobbying with the crypto community right now. And the crypto community has decided that they want to do this kind of sort of aggressive campaign with the Republicans to say “crypto is good, and anybody who's against it needs to get out of the way”.
I think it's a really bad and tough strategy. I think that you need to get both Democrats and Republicans on our side. That's how strong industry should advocate in the United States. Like bankers have support in both parties, pharmaceutical, oil companies do. You need to have both on your side. Because if you go for one side, you're gonna get in trouble, you're gonna get hit, because the other side will still be trying to attack you.
And that's what's happening right now. Democrats are attacking crypto. And the crypto industry is not doing a good job fighting that off. And they're telling themselves they're doing a great job. So everybody is going on Twitter and saying, look at how great of a job we're doing. Attacking the Democrats is a terrible strategy. It's not going to work and I'm trying to get everybody stopped.
– But do you agree or disagree with SEC that wants to equate tokens to assets? They want to make it equal, like shares and tokens?
– I think equity on blockchain is great and it will persist. It just requires a lot of regulatory stuff. The US laws are so tricky. So I hope more people will work on it.
– What do you think regarding investigations and lawsuits against Binance and other cryptocurrency exchanges? They create complex instruments and derivatives and regulators just wants to make it work properly.
– I think the greater problem is that the Democrats are against crypto. All this stuff is coming from that. And if you can fix that, then every single regulator is going to be easier on you. To my mind, that's the main problem that has to be fixed. And then there's dozens of other problems that come from that.
If you have read this article to the end, we hope that means it was useful for you.
We work to ensure that our journalistic and analytical work is of high quality, and we strive to perform it as competently as possible. This also requires financial independence. Support us for only UAH 196 per month.
Become a Mind subscriber for just USD 5 per month and support the development of independent business journalism!
You can unsubscribe at any time in your LIQPAY account or by sending us an email: [email protected]