The startup investing space is generally a gated community closely guarded by network effects and accredited investor laws. Flux intends to change that.
Founded by Peter Mitchell, Jasper De Gooijer, and Jascha Samadi, Flux is a platform for peer-to-peer trading of derivatives on startups. On Flux, users can create prediction markets to trade startup milestones like product releases, investment rounds, and progress (or setbacks).
“We believe the startup world needs transparency,” CEO Peter Mitchell tells The Block. “Flux will act as a signaling tool to help derive a more accurate value [of startups].”
Flux was founded in early 2018 as an offshoot of the co-founders' previous startup, EveryDapp, a dApp discovery platform for users and developers to explore, discover, and test decentralized applications. After raising an undisclosed pre-seed round for EveryDapp, the co-founders attempted to raise a seed round to fund its growth. It was during this time the idea for Flux came to fruition.
“We were frustrated about VC space when the [crypto] market started to crash,” said Mitchell. So his co-founders decided to build Flux to allow the venture capitalists that rejected their pitches to “put your money where your mouth is and bet against” the company. The co-founders chose to leverage the Ethereum, 0x, Augur, and MakerDao protocols to build out Flux.
The company recently launched a private alpha to allow early users to test the platform. Currently, there are two markets for trading:
- Will Flux Market UG close their seed round by July 1, 2019?
- Will SpaceX launch a manned rocket mission by the end of 2019?
The Flux Platform
Flux isn’t the only peer-to-peer prediction market platform in this space. Others like Veil, Guesser, and Augur are competing for the same users as Flux.
Mitchell argues that Flux provides a middle ground for users. "Guesser is focused on new users coming to crypto and Augur is more [focused on] professionals,” he says. “We come into the middle. We are focused on millennials who are [already] in crypto.”
A Flux market
One potential issue with Flux is insider trading. How do you stop a SpaceX employee with non-public information from trading on it? Mitchell tells The Block that when Flux launches, the company will curate the market to decrease the potential for insider trading. However, he admits that because of the permissionless nature of what decentralized prediction markets are building, insider trading will happen.
Mitchell, nonetheless, believes Flux is a net positive for the investment space, citing the “widely disproportionate” valuations startups are receiving. Flux, he believes, will bring the “same transparency” to the private market as seen in the public markets and “force founders to release more information on their products.”