Since its founding in 2011, Science Inc. has created and incubated over 70 companies operating out of its modern industrial office space in Santa Monica, CA. Of their portfolio companies, notable exits include Dollar Shave Club (acquired by Unilever for $1B), HelloSociety (acquired by the New York Times), and Famebit (acquired by Google).
From their very impressive track record over the past 7 years, it is clear Science is able to identify legacy industries and create platforms for innovation. However, looking toward the future – what is there to expect from Science?
Blockchain technology is latest hype amongst the entrepreneurial community. Science seeks to position themselves at its core with a new arm of their incubator called Science blockchain. Science Blockchain seeks to raise $100 million through their ICO to start a blockchain incubator. Their token yield a percentage ownership of their fund, which would be tied through smart contract to deliver any additional tokens distributed by its companies in the future.
A Closer Look
I had the opportunity to interview Science Founder Greg Gilman to discuss the scope and vision for this blockchain incubator:
How is the success with companies like DSC in the past with science inc tranfer over to the blockchain space?
We founded Science in order to be able to start invest in and help grow successful companies. Companies that needed the same operational underpinnings across the board regardless of what they’re focussed on. There are obviously differences between an ad-tech startup and an ecommerce startup. But the fundamentals of having a solid team and pursuing a big problem in a large market is what ties together all the businesses we are trying to build.
I think the blockchain enabled companies that we believe we will be incubating in the future will be the ones that we believe will be the highly successful, long term businesses that really have enterprise value independent of what their token offering may or may not be. We will take the same approach as we did with non blockchain businesses.
Do you have companies in mind already for Science Blockchain?
The businesses that are in Science come into the family one of two ways. Either they are internally generated businesses – we find an area that we want to explore and we explore that concept from multiple angles, we explore different business models, and then we incubate a company against that – or we partner with extraordinary entrepreneurs pursuing an area in which we think we can add value and have significant experience.
The former resembles HelloSociety, a company we sold to the New York Times. It was an internally generated concept that we then partnered with an extraordinary individual CEO at the earliest stages. The latter is the Dollar Shave Club model where the CEO came to us with an existing concept and said this is the business that he was interested in building. It was an externally generated concept that fell into an area that we had thought about exploring.
We will absolutely have the same mix going forward. We will explore internally generated concepts and also partner with external teams that are building category 1 businesses. We have a team here internally at Science that has been dedicated to the blockchain space for a while.
We originally got in 4-5 years ago, made some initial investments, and spun up some companies, but then didn’t have the operational confidence to jump in with both feet at that time. We decided to wait for the market to mature, and for the ecosystem to evolve to the point where we got comfortable enough thinking that we can actually build big legitimate businesses. We do now have a pipeline of numerous new concepts.
Given many companies appear to be taking advantage of the blockchain buzz with rather irresponsible ICOs, what do you look for in potential blockchain investments?
Just like we do with non blockchain companies, we are looking for companies that solve big problems – that use technology to solve these problems in a way that’s going to materially improve the way things work now, for a large amount of people. We are highly focussed on the team that is trying to execute that concept because at the end of the day what we’re doing is we’re betting on those people to solve the problem that they are trying to solve.
And it’s the same with the blockchain businesses that we are evaluating. It’s all about the team and the problem they are trying to solve, and for us there has to be a fundamental reason why they are building on the blockchain, using distributed ledger technology for this business – and the answer can’t just be “because we want to do an ICO”. That’s not a reason to build on the blockchain.
We feel that ICOs are appropriate for later stage businesses where they’ve found the team, they’ve found the product, they know what they’re doing, and they found product market fit. And you’re using an ICO to do one of two things – to replace a later stage a equity financing, or you’re using it to get your utility token in the hands of a broad audience, or potentially both.
We generally don’t think that early stage businesses need to do an ICO for large amounts of capital. The same reason we don’t see startups at the stage of two guys and a business plan in a garage don’t raise hundreds of millions of dollars. It doesn’t make sense. It’s far more risky to raise money at that early stage than at a later stage when they’ve found the team, they’ve figured out their product, and they’ve figured out their product market fit.
As potential investors take a look at your site, they may notice there is no white paper – why?
From the beginning, we’ve carefully structured the platform and the offering to be exempt from registration with the SEC under reg D, so when you look at the spectrum of token offerings, there are two types – those that look like a utility token, and those that look like a security.
Blockchain Capital in April paved the way to show how a sophisticated business could do an offering that looked very much like a security. We followed that playbook very carefully. We used the same advisor that Blockchain Capital used and we structured it as a security from the beginning. And because we structured it as a security we did not need a white paper.
What Blockchain Capital did was very complex. What we’re doing adds a layer of complexity due to the nature of our token, which is fundamentally unique. Nothing like it has been done before, which is phenomenal. For those reasons it’s been a very carefully structured process.
As Blockchain Capital and TaaS have paved the way with tokenized Venture Capital funds, why does Science choose to instead maintain the more hands-on incubator model?
Our thesis from the beginning is that we get to know these companies intimately over a very long period. We work with them on a day to day basis – for however long it takes – to get them up, operationally sound and on a path to success. We don’t run classes, we don’t have those 90 day programs and you’re out. We partner with companies for the journey no matter how long that journey takes.
Even with the companies we’ve exited, our involvement remains as Mike was even on the board of Dollar Shave Club until their exit, and HelloSociety was still in our building after their exit. We were long term involved with those businesses.
From an investor perspective, we certainly get to know the companies very well, and help them succeed. Blockchain Capital and TaaS for instance, have shown they are able to make very smart investment decisions without having to spend six months in the weeds with the companies like we do. I think there’s a place for both of us in the market and I would not be surprised to see us involved in a number of the same projects going forward.
How did you engineer the economics behind the Science Blockchain token?
With the Science token there are two potential value streams. The first is future ICOs of the companies incubated by Science Blockchain. Each holder of the Science token will automatically receive tokens of future ICOs from the incubated blockchain companies. The second is the sale of equities. As companies exit, Science will use this money to purchase back Science tokens on the open market. This reduces the supply of available tokens. As more exits occur, the supply of tokens will decrease, creating an entirely unique, evergreen investment vehicle.
Thank you Greg, for taking the time for this interview. I’m glad we were able to shed light upon the vision of Science Blockchain and how Science is now doing something that virtually no one has done before. A token backed by a Science Inc incubator has the potential to completely disrupt the blockchain space.
The token sale will be live soon. Further information about Science Blockchain’s ICO can be found here.