Coatue and Tiger Global Betting on Braintrust and a Web3 Revolution in IT and Operations Optimization
By: Charlie Heinemann
Tags: Web3, Token Sale, Technology, Information Technology, Recruiting Technology

This December, Braintrust announced a $100 million private token sale to an investment group led by Coatue with participation from Tiger Global, True Ventures, Hashkey, Blockchange Ventures. The infusion of funds is specifically meant “to grow the network and fuel rapid community-led innovation.” This indicates that this investment is less about what Braintrust does, match employers with talent, than how it does it, through community ownership and web3 protocols. In so many ways, this investment is about the future of digital transformation and how corporations will, or in this case will not, manage it.

The Disappointing Good Intentions of Digital Transformation

The digitalize or die wave that has gripped IT and Operations for a decade has only intensified over the last few years as dramatic commercial shifts strain bottom lines and remote work becomes the norm. In 2022, IT budgets are expected to eclipse those of the past 2 years and soar to 2018 levels and beyond.

The majority of this new spend will be on Web 2.0 projects that will fail. A 2020 Boston Consulting Group study concluded that an astonishing 70% of digital transformation projects fall short of their goals even when the organization is fully on board. Companies will fully commit to digital transformation this coming year and, sadly, they most likely won’t actually transform the organization in any significant way, leaving users underwhelmed and the IT team hobbled by an already outdated infrastructure. This failure will cost corporations nearly $111 billion.

Braintrust and the Web3 Approach

Braintrust is a web3-powered 2-sided marketplace currently focused on connecting high-end freelance tech and design talent with top employers. It’s main innovations, however, don’t surround its approach to recruiting, but its approach to operationalizing a business.

Instead of bloating an IT department with full-time personnel and expensive consulting firms, it uses grants and bounties to incentivize its freelancing tech-centric customer base to create value within the platform. The Braintrust platform’s initial use case of high-tech talent matching and job bidding is ideal because it attracts the exact people to the marketplace that Braintrust needs to help build out its core platform. In turn, talent is able to boost their value through increased technical experience in an emerging area, web3, further differentiating their talent supply.

Furthermore, The protocols that govern token ownership, voting, adjudication and eventually features like staking (enabling talent and employers to stake tokens to insure delivery on both sides) resolve user research deficiencies (because the users themselves are shaping the new functionality) and reduce bloat in other departments like legal and finance. Not coincidentally, Braintrust plans to expand its services to these other disciplines in the future, further enabling the ecosystem to successfully shape the organization.

The above information comes from Braintrust’s real-time Network Dashboard where community members can openly track Braintrust’s growth.

The $100 million token investment led by Coatue and Tiger Global, among other things, is an investment in the promise of web3 tech to change the IT and Operations cost structure of 2-sided marketplaces, optimizing the IT and operations spend and making them much more profitable, even as both sides get better deals. Braintrust openly targets what it calls “outdated, fragmented recruiting systems” by incentivizing community members to contribute technology, educational services and social marketing. This reduces friction on all sides, making connections between supply and demand quicker and cheaper to execute. Buying $100m in BTRST specifically “to grow the network and fuel rapid community-led innovation,” will act as a catalyst for this virtuous cycle.

Flipping the UpWork Model

To see how this might work long-term, let’s compare Braintrust’s model to that of UpWork, one of its web 2.0 competitors. UpWork generates revenues from membership and transaction fees charged to both talent and employers, with talent shouldering most of the cost.

Braintrust doesn’t charge talent for its services, instead choosing to take 10% of the contract value from the employer.

Because of this approach, the employer pays more in the Braintrust model, but the overall marketplace share (what UpWork calls the “take rate”) of the transaction is less.

Braintrust’s single-sided fees ecosystem is actually more economically efficient and obviously more attractive to top-tier talent. But will the employers pay more? Braintrust is betting that the employer will because it will want to be where the top-tier talent is. This may have them paying more in service fees, but also getting more for their money. One could also envision overall hiring costs dropping due to less friction in the end-to-end process, creating better employer terms as a result of this efficiency. At a cost of anywhere between $3000 and $4000 to hire a single employee, streamlining the hiring process and gaining access to adequately vetted candidates can lead to sizable reductions in the overall cost of recruiting and impactful increases in net productivity.

Expected Challenges Remain

Braintrust has some challenges. It’s talent pool appears web3 curious but more often than not doesn’t understand web3 itself or it’s role in the recruiting world. The talent is often simply there for globally accessible well-priced contracts with good companies. That in and of itself isn’t bad, but it does necessitate continued education concerning the value of the platform, and it means that the current talent pool isn’t likely to be enough to implement the required changes to the protocol. Fortunately, however, its community-based contribution model is designed specifically to address these shortcomings through education and ambassador grants.

Braintrust and the New Way Forward

Today, corporations are spending large sums on digital transformation largely driven and resourced in house. This is costly and often disorienting as the core business suffers under the distraction of technological pressures. The Braintrust web3 approach provides a solution to this model, creating potential for a win-win between corporations that must update their technological core to survive and the increasingly-empowered high-end talent needed to make such updates possible.