Why $KAITO?
Decyphering the $400M revenue-backed memecoin.
By all accounts Kaito was doing just fine before the token launch:
They raised $5.3M in February 2023
They raised $5.5M again in June 2023 at a $87.5M valuation
Moreover, they were a refreshing contrast to many companies in crypto looking to use token launches as a shortcut before achieving PMF:
They built a vertical LLM-powered search engine
Kaito Pro ends up getting used by some of the best teams in the space like Flashbots and EigenLayer (presumably for strategy & growth initiatives)
Kaito had a waitlist of 35,000 users (of which 2,000 converted)
Advait speculates they achieved $6M ARR from 500 teams
KOLs loved receiving Yaps and the incentives started impacting CT.
Then Kaito launch a token with scarcely an explanation what it’s for.
Why?
THE CONFUSION AROUND $KAITO
Even the most enthusiastic Yappers admitted they don't get it.
Many sold as a result.
I watched a 2.5 hour podcast with the Kaito Founder Yu Hu and he seems like a thoughtful, product-oriented Founder but I'm no smarter about the token.
In order to figure this out, people even started speculating based on Kaito GitHub commits.
This highly speculative theory of Kaito building a decentralized search engine is actually the most concrete one out there.
It’s not completely left-field as Kaito docs prominently feature this quote from Vitalik:
A NEW APP-MEMECOIN META?
The launch was still reasonably successful, commanding a much higher valuation than even optimistic estimates of Kaito’s revenue numbers would suggest.
But the lack of a fundamental tie-in between an onchain product and the token effectively means it’s a memecoin.
Contrast this with Venice.ai which followed a similar path app→token but had much more tangible tokenomics to work with.
I can see a couple reasons they decided to pull the trigger on the token so early.
1.INVESTMENT TERMS
This would be the most boring answer but it’s possible that they had a formal or informal understanding with their investors around the expected timing of the TGE.
Given Kaito valuation multiples were higher than their SaaS metrics would suggest, it’s likely that most of the value was priced in token liquidity.
Just because a team is providing a valuable revenue-generating service doesn't preclude their investors from seeking the most pragmatic returns.
This is crypto after all.
2.MARKET TIMING & NARRATIVE
It’s possible that the Kaito team observed overall market sentiment around recent token launches and perceived a tightening of market liquidity going forward.
From a narrative perspective, if the product tied to the token is materially different than their current portfolio, it’s possible that launching an early MVP of that product while adding more concreteness would have had a harmful effect on the initial valuation.
Last but not least, Kaito had convinced most KOLs that collecting Yaps is valuable.
Once that was accepted, there was a recursive sense of hopium around the value of those Yaps:
KOLs earning Yaps had no incentive to be critical of Kaito
Doing so would either suggest that they are wasting time by earning them
OR it would influence their audiences to undervalue $KAITO, resulting in a smaller airdrop
Thus, many KOLs were shamelessly talking about $100 Yaps which created fertile ground for a launch.
3.PRODUCT REASONS
While the token raises questions, the airdrop mechanics were incredibly advanced and involved LLM-based assessments of various soft-factors such as loyalty.
There could be meaningful product-related reasons that the token had to exist before the token.
For example, if Kaito are planning to sell their airdrop engine, they've now proven its success in driving FDV for their own token.
Perhaps their product is very ambitious and required more funding or cash for incentives than the $10.8M they received in 2023.
Bootstrapping a new market for information would certainly fall in that category.
In the end, it’s fitting that a team that is focused on analyzing influence and attention had a narrative-based token launch with little actionable details around fundamentals.
But whether that means you should start staking or exit, I'm not sure.
Lots of people held on simply because of the pace of shipping they are seeing from the Kaito team and how rare that is among today’s teams.
One thing is for sure: keep Yapping.
While you may have missed the airdrop, Yaps are continuing to accumulate and will continue to serve as a discovery engine for creators + an input to future airdrops (my guess) even if they are not the most important part of the network going forward.
Very well documented.