Polygon Labs Paid $4M to Host Starbucks’ Doomed Foray Into Crypto: Sources

Polygon Labs paid $4 million to host Starbucks Odyssey, the NFT-powered loyalty program that made headlines as a crypto biz-dev coup.

The deal was a trademark of a “massive and flashy” enterprise growth technique that Polygon has since deserted, folks aware of the matter stated.

Firms often pay their tech distributors for providers rendered. For Starbucks’ soon-to-be-defunct foray into crypto on the Polygon community, it was the opposite method round.

Polygon Labs paid $4 million to the espresso big in 2022 as a part of their deal to construct and host a blockchain-based loyalty program, Starbucks Odyssey, on the Polygon community, in line with two folks aware of the matter. The payout ended a aggressive hunt by proponents of at the very least three blockchain ecosystems who wished to accomplice with Starbucks, a 3rd particular person stated.

The beforehand unreported determine provides context to the origins of considered one of crypto’s flashiest crossovers into American client tradition (and subsequent flops). Final week, Starbucks pulled the plug on Odyssey, its 18-month experiment in utilizing collectible non-fungible tokens because the anchor of a loyalty program.

The determine speaks to the price of doing enterprise growth in crypto. In 2022 Polygon Labs pursued headline-grabbing partnerships with the likes of Nike and Starbucks, the form of firms that may elevate Polygon’s identify recognition. If massive manufacturers had been utilizing Polygon as their launchpad for crypto, then maybe their huge buyer bases would observe go well with.

They didn’t.

“These kinds of massive flashy offers are a remnant of the previous and the earlier management’s technique,” stated an individual aware of Polygon Labs’ present pondering. The corporate, the principle developer of the Polygon blockchain, is now extra targeted on constructing progressive tech than inking partnerships, the particular person stated.

Origins of Odyssey

The take care of Polygon seemingly wasn’t solely a cash play. Starbucks seems to have been genuinely fascinated by discovering a Web3 accomplice that may host Odyssey. Its search was being led by Forum3, a advertising consulting store whose co-CEO Adam Brotman was as soon as Starbucks’ chief digital officer.

Brotman had conversations with representatives from Polygon in addition to Solana in early 2022, two folks aware of the discussions stated. Samson Mow, a longtime bitcoin booster, informed CoinDesk he lobbied Starbucks to decide on Liquid Community, a bitcoin layer-2.

Forum3 selected Polygon for its tech, one former Polygon worker stated. However the deal additionally got here with the grant in addition to in depth technical and advertising assist to assist Forum3 arrange the Starbucks loyalty program, that particular person stated.

The Voyage Begins

Starbucks Odyssey sought to reimagine the espresso firm’s common loyalty program with a crypto tint, in line with a case examine revealed by Forum3 in January. Members would get “stamps” (collectible NFTs) for finishing duties. They may use these stamps to qualify for rewards like invites to coffee-themed experiences or unique branded swag.

The loyalty program promised to be a moneymaker for Starbucks. It bought these stamps for as a lot as $100 apiece. It seemingly remodeled 1 / 4 of 1,000,000 {dollars} by taxing secondary gross sales of the stamps, in line with on-chain knowledge.

However Odyssey additionally had upside for its members, the stamp consumers. They may resell the stamps to others by way of a digital storefront arrange by Starbucks and Nifty Gateway, an NFT market.

Forum3’s case examine hailed the “measurable financial worth” Odyssey may create for Starbucks and its followers. The primary monetized Odyssey NFT collection (the Siren Assortment) bought out in 18 minutes and shortly traded at a 4x premium, in line with Forum3.

As occurs with many NFTs, Odyssey discovered a collector neighborhood that believed in its worth potential and wager massive. One such collector was Dan Elitzer, co-founder of the enterprise capital agency Nascent.

“We have not invested an enormous quantity in comparison with what we sometimes do,” Elitzer stated in a January interview. Even so, Nascent believed that Odyssey NFTs may have long-term worth if Starbucks Odyssey endured as the primary massive NFT loyalty program, he stated.

Even earlier than Starbucks stated it might shutter Odyssey, its NFTs worth proposition was below stress. The final Siren NFT to promote earlier than Starbucks’ March 15 announcement was priced at $215. On Tuesday potential consumers had been providing a most of $86 per Siren NFT, whereas sellers wished at least $165.

Representatives for Forum3, which as soon as billed itself as a Web3 firm however has since pivoted to AI, in line with its web site, didn’t reply to a request for remark.

The Odyssey Ends

Starbucks Odyssey succeeded in fostering a distinct segment following throughout its 18-month run as an invite-only “beta” program. Together with a vibrant Discord server, it impressed a cult following whose proponents traded the NFTs, boosted this system on social media and even created a “Ideas” web site to assist folks strategize their points-earning.

That neighborhood was in a way of shock final week when Starbucks abruptly introduced the Odyssey was ending. Members traded messages of grief, anger, unhappiness and wistful recollections in its personal Discord server, in line with screenshots of messages reviewed by CoinDesk.

“It’s positively just a little upsetting as somebody who has put a while and $$ in however total I perceive the pivots of massive enterprise and I’m comfortable that Starbucks examined the idea,” Bryan Kayne, a crypto advisor and Odyssey member, stated in a Telegram message to CoinDesk.

In an e-mail to CoinDesk, a consultant for Starbucks stated: “We’re wanting ahead to making use of our learnings to the way forward for this program.” She wouldn’t element what that future holds, nor whether or not it can proceed working in Web3.

“We worth our relationship with Polygon and the contributions it has made to Starbucks Odyssey,” the consultant stated. She wouldn’t talk about the financials of its enterprise partnership with Polygon.

Outdated Polygon, New Polygon

The Starbucks deal was an exemplar of the high-flying, big-name-forward dealmaking fashion Polygon pursued below the management of Ryan Wyatt. The previous on-line gaming govt was Polygon Labs’ president from early 2022 till mid-2023, when, in line with two folks aware of Polygon, he was ousted.

“Should you have a look at Polygon Labs now, over the past 9 months they’ve shifted their focus to turn out to be a tech powerhouse targeted on ZK tech and offers which have extra of a direct impression on-chain somewhat than advertising worth,” one supply stated.

The change additionally displays the challenges of constructing crossover Web3 merchandise for a non-crypto viewers, paid deal or no. A number of customers and proponents of Odyssey informed CoinDesk the characteristic was constructed to accommodate those that did not have a crypto pockets or an understanding of blockchains – in different phrases, most human beings (and by extension most Starbucks prospects).

A former Polygon worker who labored on the Starbucks deal stated it was no shock Odyssey is shutting down.

“Chasing Web2 is a idiot’s errand, for my part,” the particular person stated, referring to established tech giants. “The crypto native narrative is large enough when you play it proper.”

Wyatt, who declined to remark by means of a spokesperson at his present employer, Optimism Limitless, highlighted his emphasis on the advertising worth of dealmaking in recorded talks he gave after leaving Polygon.

“We had been in a extremely good place the place folks had been on the lookout for constructive tales and so quite a lot of the efforts had been amplified,” Wyatt stated in an interview with crypto investing agency Variant in September 2023, months after leaving Polygon. Partnerships with “family model names” helped Polygon “set up credibility,” he stated.

It was frequent for Polygon to pair grants with their partnerships, a former worker stated, calling the apply commonplace throughout crypto. Wyatt stated the identical in an look on CoinDesk TV in December 2022.

“All of the protocols are doing paid offers,” he stated on the time.