Finding success as a tech startup is difficult enough under the best of
circumstances. But when you base your business around blockchain technology and
mix in the uncertainty of cryptocurrencies and a global pandemic, things become
even more complicated. Yet, LuxTag has been able to find multiple verticals to
serve and create positive momentum moving forward.
LuxTag cofounders Rene Bernard and Jeff McDonald sat down with Roland Siebelink
on the latest episode of the Midstage Startup Momentum Podcast. They discussed
both the unique challenges and successes that LuxTag has experienced during the
company’s startup journey.
- How Rene and Jeff foresaw the future of blockchain technology years before it happened.
- The challenge of navigating the boom-and-bust cycles of cryptocurrencies.
- The difficulty of having technology before there was a use case or a problem to solve.
- How LuxTag copes gets developers to stay with the company.
- Finding a balance between investing in technology and recognizing the importance of sales.
- The importance of finding employees who have the same background as your core target group.
Roland Siebelink:Hello and welcome to the Midstage Startup Momentum
Podcast. I'm your host, Ron Siebelink, and I'm a startup coach. And I have today
with me two co-founders from LuxTag, a truly global company that I want to hear
all about. Rene Bernard is the business co-founder and Jeff McDonald is the
technical co-founder. Thank you guys for joining.
Jeff McDonald:Thank you. We're glad to be here.
Rene Bernard:Yeah, let's make this happen.
Roland Siebelink:Let's make this happen. Excellent. Rene, I'm going to
start with you. LuxTag, what kind of company is it? What do you do? And
especially, what difference do you make in the world?
Rene Bernard:Wow. Okay. We are here to create a world of honesty where
people don't cheat each other and don't even have a chance to do so because we
secure items, assets, and even graduation certificates using digital
certificates of authenticity using blockchain technology, which is one of the
latest hype technologies in security. And we are engaging consumers with
connecting them to the products and the manufacturers through tags. That is
where the name LuxTag comes from.
And when you asked what LuxTag is about, it came from luxury product tagging.
But at this moment, we are not only at luxury. We are actually, as you
mentioned, a global company in various industry sectors at this moment, tagging
physical items, assets, and even intangible assets to make them secure and
Roland Siebelink:Excellent. Okay. Then Jeff, we do have to hear a little
bit more about this little key word that some people may have heard about,
blockchain. Let's take away the veil of ignorance. Of course, everyone knows
about blockchain. Is this closely related to the trends around non-fungible
tokens and authenticity that way? Can you engage our technical audience with
exactly how you are doing this?
Jeff McDonald:Sure. Yes. Rene and I have been in the blockchain world for
many years, since 2013 or before. And we were very fascinated, originally, by
the idea of Bitcoin, of course, because that's what was popular back then.
Bitcoin allowed for the first time ever this new kind of asset class, this new
kind of money, this money of the internet. Nick Sabo, a famous blogger, says,
"Trust minimized." Or as other people in the community say, "Trustless."
And that means it's money on the Internet that you don't have to have a third
party. You don't have to take someone's word for it. It's digital money, but it
can be your money. It's not the bank's or the government's. And like I said,
this was a new digital asset class. But when we examined the technical aspects
of the blockchain, even back in 2013, in 2014, we knew that it wouldn't be the
only asset class. We knew that other than Bitcoin, people would start making
their own coins, companies would start making their own coins. There would even
be something, which as you mentioned, was called an NFT, a non-fungible token.
This is an asset class where you can think of a Bitcoin as a fungible point, a
whole coin, money itself. A non-fungible token is an individual token. It's a
unique token. It's a specialized token. It's a one-of-a-kind, it's a collector's
item. You could think of a property title. Every property title for a house, in
theory, should be at least a little bit different than the property title next
to it because they all have a little bit of different information in it.
And we realized that the blockchain could be used not just to store assets like
money, fungible assets, but also unique assets. By 2016, we started working on
this idea of non-fungible tokens. Now, the idea didn't exist back then. This
word, non-fungible token, hadn't been invented yet. We actually developed a
standard called the Apostille Standard. I was the main author of the Apostille
Standard. Talked about it with Rene. Talked about it with our third co-founder
Faeez, who isn't here with us today but had a lot of great input.
We thought, yes, this is going to be big. We should make a company making these
things, these tokens that are non-fungible using the blockchain to secure them.
Everybody can see it. Everybody can understand what it is. Everybody can know
that this unique asset is on the blockchain and who it belongs to. And we
thought, "Wow, this is going to be great. The world could use this and a hundred
different use cases."
Not just property titles. But yes, you could make little items and video games,
or you could use it for securing birth certificates or graduate diplomas or
identification. You could even use it to make a voting registration card and
then use that voting registration card on the blockchain to vote. And your vote
itself could be a non-fungible token. We were just fascinated with this idea,
thinking about, yes, blockchain is going to explode. Money is going to explode.
And when it does, we will be there to take part in this non-fungible token
Roland Siebelink:Excellent. Of course, I want to hear many more examples of
how you apply this and which use cases you're primarily supporting so far. But
before that, I'm actually intrigued in hearing about your history because you
said you were both engaged in Bitcoin already in 2013. But can you guys tell me
a little bit more about how did you meet? What was your background? I think our
audience actually also wants to hear what is this global company all about.
Where are you based and where are you from? Shall we start with Rene?
Rene Bernard:We are now based with our headquarter in Malaysia, Southeast
Asia. Actually, Malaysia is directly next to Singapore, which is known as a big
business hub. But it is a much more affordable seat for a company; office space,
more affordable salaries, and all the utilities you need to spend money on as a
startup. We are very well positioned here in a good environment with good
support from the local government as a startup business. Happy to be here, but
our market is not only here. Our market is truly global. We are hoping to
leverage on a rather low-cost environment and international funds with an
international pricing level flowing in. That's one of the little secret sauces
in our startup.
I can actually say more than three quarters of our funding came in
cryptocurrency tokens. And as believers, we are people who do not easily let go
of these tokens because why sell them when we know they will be going up until
the market shows us. We might be right, but it's a long-term game and a startup
business and making it to a break-even point, more revenue than running costs is
a short-term game, a midterm game. It's not that we have unlimited time or five
years, 10 years to make it. Whereby, with blockchain and cryptocurrency tokens,
we are in it for the long-term.
This is a little thing which is haunting us until now. Yup. Even nowadays, we
did not break even yet as a business, even though it's already going into our
fourth year right now. We did not break even. We are still using our
cryptocurrency funds from investment rounds. We are hoping for the best and
doing the best on two fronts now, on startup work right to bring in business,
bring in revenue. And the second leg of hope here is that we can extend our
runway through our token appreciation. It's a multiplier of risk, which I think
is maybe one of the learnings. It's risky to run a startup business already. And
to have a majority of your treasury in an asset class which is highly volatile
is another risk enhancer.
Roland Siebelink:No matter how big of a believer you are, right?
Jeff McDonald:As a startup founder, as an entrepreneur, you need to be able
to believe in your product. You need to be able to believe in your technology.
That was never our problem. We were always thinking this was going to happen and
it more or less has happened like we thought. What we didn't predict was the
high volatility. I would lead in - and Rene knows more about this, or can
probably speak to it a little bit better - it's not just our treasury
We definitely had lessons learned with treasury management, making sure that if
you're holding an asset class, that you could manage it correctly. There's
things that we could have done. We could have put in some margin orders. Took
10% of the supply and put in a short at a leverage, so if the market went down,
we would be covered. That's why going short and long was originally invented on
the stock market was so that farmers or people in the oil company or any
commodity can make sure that their future expenses were covered. That was one
thing that we could have done with treasury management.
But another problem with the boom-and-bust cycles of the blockchain is that it
affects our customers. When people have made money, and the times are good, and
the economy is good, people want to reinvest, people want to explore. But when
times are bad, when there's been a boom or when blockchain as an industry, as a
whole, has gone through a lot of negative press cycles, then our customers are
We have a double whammy or double-win multiplier working in the blockchain
industry. We have the ability of our past funds to go up and give us more
runway. But we also get more clients whenever the market is good. And the
opposite happens whenever blockchain is going through a down cycle too.
And so, this is something that we as startup founders have had to try to learn
how to prepare for and react to. And blockchain is such a new industry in such a
new phase that I think that at least we're learning this lesson before a lot of
people. Maybe I could share that. A lot of this sounds obvious to the listeners.
But this was some lessons that were learned. Nobody told us this. It was a
lesson that was learned. In hindsight, it seems pretty obvious.
Roland Siebelink:Maybe we can also start moving to the customers we talked
about. Where does LuxTag apply? What businesses do you serve, businesses or
consumers? And which use cases have you found the most compelling for LuxTag?
Rene Bernard:Because we are a business company, after all, the business
model is from serving customers and make them pay for our solutions. Not only to
grow token prices of cryptocurrencies. We had started, as our name says and as I
introduced, LuxTag with the focus on luxury product manufacturers because we saw
that this is something where we need customer engagement. We need authenticity.
We even need an ownership tracking system.
Roland Siebelink:Actually verifying that a Louis Vuitton bag is authentic?
Rene Bernard:Exactly. Authentic and then you own it and maybe even some
provenance; where does it come from? We did not want to go into the sector of
the government-controlled ownership, registries, like the land registries or
even medical matters, which is a regulatory burden or complicated to start.
There's the private sector, valuable items, most importantly a clear use case.
And that was even what we initially pitched, brought forward. And we had gone to
Switzerland. Proudly, we met with large watchmaker brands. We had engagements.
However, it's not easy for an innovative tech disruptor or startup company to
work with these hundred-years old, established brands. A brand, for example
Rolex, they create their own steel, their own glass, their own everything. It's
in-house, everything. And they wouldn't just outsource the technology for some
blockchain tagging to a startup from Southeast Asia.
We were a bit naive in going that way, trying to offer our services. But we met
companies like this one and in that category. But we learned our lessons that
that's not the best way to go forward, so we went broader and then we got
success in mainly two sectors. One is the food and beverage sector. The people
genuinely care about what they eat. Is it really organic or is it really from
where it says to be?
Second sector where we are now in is educational credentials. Micro-credentials,
which links the regulated educational sector into a wallet of your credentials.
Besides the micro-credentials of the other smaller educational institutions, all
can form a ECV with authentication tags and all these features serve the
headhunters, job portals, employers, universities, and the graduates for
lifelong learning authenticated.
We have F&B. We have this educational. And another sector we are working now is
actually not really a sector, but it's part of a business model. It's the
software as a solution system, a SaaS model, which will be called BrandTag by
LuxTag. BrandTag is the solution which is a DIY sign-up solution where you prove
that you are that company. We will do a verification check on you or you upload
the trademark document, and then you can create SKUs. You can create products,
you can serialize your product. And you can download serialized codes through
our codes, or even order from us and NFC tags, which we ship you to attach to
the product. And then you can - a little bit like a Wix editor website - where
you can design a verification page for your end consumers, a verification of
engagement page. It's a DIY solution where you pay a subscription fee and you
can tag whatever you want.
Roland Siebelink:How long did it take you to land on these verticals as
your success verticals?
Rene Bernard:Three years. We are still with validation and with these
things. Sorry to answer this one right now. Maybe it's not exactly your
question, how long did it take? Actually, we made lots of mistakes in our
startup journey. We came from the technology side. We were technology people. We
loved this new cool technology, and we wanted to embed it into the real world.
Now, find a problem which our core technology can solve. Normally, the startup
approach is a bit different. You identify problems first.
Roland Siebelink:I still wouldn't want to be the entrepreneurs that start
on the solutions side, especially in the Bitcoin and blockchain. This is why I
love talking to people with European backgrounds as entrepreneurs, because
they're not afraid to talk about their problems and their mistakes. That's
harder with Americans, right, Jeff?.
Jeff McDonald:I always want to spin the good side of the story. But that's
because I'm positive. I'm very positive.
Roland Siebelink:Absolutely. And I think good entrepreneurs can do both.
And then also open up a little bit about where they can still improve. And I
think that makes them ever so more credible. I love this.
How about your team? Can you talk a little bit about the history of the team?
And I'm guessing that maybe there was some difficulty as well at some point in
time when your funding dried up so much. How did you cope with all of that and
how does the team like now? Maybe Jeff again?
Jeff McDonald:I can speak to the technology side. Blockchain is such a new
technology that you're always having to teach the developers. There's very few
university programs where you can just hire somebody. Now that is coming. It is
coming. There are some universities doing that. But when we started LuxTag,
there was none of that. Anywhere in the whole world, there wasn't a single
program. And so, we had to teach our developers everything from scratch.
And then the big problem that you have next is that when the markets are hot,
everybody's willing to pay a lot of money for a developer. There's a lot of
people that will offer our developers extra money, higher salary to go work for
them. Luckily, we have a nice office atmosphere. Everybody likes each other. And
a lot of times, our developers will just come and tell us, "Hey, so-and-so
offered me a job." And then Rene says, "Please stay, please stay." And they say,
"Okay." He's been a wonderful head of the company, creates a positive atmosphere
that makes people want to stay. Eventually, yes, we do have some people leaving.
Roland Siebelink:Most founders always want to hear how have you divided up
your resources? How much is in business? How much is in tech? How much is an
admin at this stage?
Rene Bernard:I think I can respond to that. We can divide it into these
three categories: Sales, business development, tech, and admin. And we have now
the majority of our focus on the business development and sales. On the second
rank would be tech expenditure and obviously salaries. And then the last one,
management and admin part.
But as a technology company, sometimes I feel we might need to put more toward
tech. But then, we can build the greatest things, if we don't sell them for who
do we build them? I've built the business and the business models around it and
even designing. Let's call it designing the solutions and doing the validations
and talking to the customers. It doesn't require a blockchain developer but a
Roland Siebelink:Yeah. Maybe with your SaaS product at some point in time,
you'll get some product-led growth, where people just sign up and it starts
growing. But that's still a pipe dream for a lot of companies.
Rene Bernard:We did a soft launch. We did soft launch our SaaS solution and
we are accepting now - let's call it, trial users. Obviously, free trials to get
more insight on what needs to be tweaked before we do the proper paid launch,
hopefully, in July this year. The tech and designer team is working on that
Roland Siebelink:That does lead me to what you want listeners from this
podcast to get out of this and how they can help you. It sounds like you have
the trial ready for that?
Jeff McDonald:We have multiple products, depending on what the customer is
and what they want to use. I would suggest that people come to our website. We
have BrandTag for products like Rene was saying, possible food products. We have
another product that you could come and try out called Papyrus. You can use
that. e-Scroll for documents. We have quite a few different things, and of
course, we have an app that's been launched on the Apple Store and the Google
Store. If you wanted to come into one of these programs like Papyrus or BrandTag
and make some items, then there's a way also to stamp your items on the
blockchain. Use our desktop app through the LuxTag website, produce items, make
basically non-fungible assets on the blockchain and then have those visible to
your customers on the app that they can download from the store. It's quite
cheap. It's a lot.
Roland Siebelink:High value is what you're saying, right? Excellent. Rene,
you want to add to that?
Rene Bernard:I would like to say, what I would love to convey to the
listeners is another interesting opportunity for everybody. We at LuxTag,
especially Jeff and I, had been discussing this earlier, we want to scale up our
outreach. Our outreach to businesses in the world and to enable others to work
with us in making that happen.
Actually, we had partnered with a Danish company to set up BrandTag Europe. And
they represent and resell our BrandTag solution in Europe. And they are helping
us a lot with giving direct good feedback on how to build the product. They have
good customer exposure. At the moment, we are looking for partners and resellers
around the world shaping this solution and then reselling in a revenue share
model with us.
This is something that our business development efforts are toward. Not only
toward customers but even toward partners and resellers because we think that's
the best way to leverage. Ideally, we are looking for partners with business and
exposure toward packaging, distribution, maybe services for the manufacturing
industries, and even law firms. Somebody who is interested in using and
deploying this technology without reinventing it. We have it! Please work with
us and embed it into the real industry.
Roland Siebelink:Last question is always, with all that experience in
running - not only LuxTag, but I think, Rene, you mentioned this is your third
company already, and Jeff, I'm sure you have some experience there as well -
what would be the one lesson you would give to founders coming after you? And
what have you learned about being a founder that you wouldn't have thought
before? What would be the one lesson to impart? Let's start with Jeff.
Jeff McDonald:You get a very good business partner like Rene.
To find a very good partner that can balance you out. Because no single
entrepreneur, unless you're just extremely lucky, is going to hit a home run
their first time around. Finding somebody who's experienced, finding someone
who's connected, and understands the whole scene. And I think that you really
need to understand what it's like to run a business. You really need to
understand what it's like to have a product. And you really need to understand
your customer base. Having different people in your company that can know these
different parts and specialize on it, I think is a wonderful way to spread.
Start off with a really great team.
I think that's one thing about Rene and myself is that we're both lifetime
learners. We're not complacent. We want to build and we want to make the world
better. And we're always bouncing ideas back and forth between each other.
Rene Bernard:My advice is to validate better. Make sure that you're working
in the right direction because what we did is that we lost not months but we
lost years of time. I'm telling myself now, it's an expensive learning curve. To
stay optimistic. That it was a good time. But we could have saved a year or two
and maybe a few hundred thousand dollars too.
Validate better. That links towar the team. The team which we have now lacked
the exposure or the experience and knowledge about the target business sectors
we want to approach and validate or sell towards. Tech people, admin people,
business people, but even the business people we had hired and we are working
with right now are more from the technology sector. I would advise others to
hire people from the field you want to attack.
Jeff McDonald:One of the things that we learned is that everything was
blockchain at the beginning. We got people that knew blockchain this and
blockchain that. And if we were going to pick luxury items, we should have
immediately hired people in luxury. Or if we were going to build our product
around food, we should have hired some people that had specialized in the food
industry with a lot of connections. If Rene and I could go back and do that over
again, we definitely would have.
Roland Siebelink:Awesome. Okay. That's great advice, get more customer
orientation and then involve yourself in that world.
Awesome, we are out of time. Thank you so much, Jeff McDonald and Rene Bernard -
if I pronounced that correctly this time - the technical and business
co-founders of LuxTag. It was an honor to have you on the podcast. And thank you
so much for joining.
Jeff McDonald:Thank you.
Rene Bernard:Thank you. Have a good day.
Roland Siebelink talks all things tech startup and bring you interviews with tech cofounders
across the world.