What’s good everyone. Hope the new year has been treating us all well so far. This week has me reflecting on the evolution of distribution channels in crypto and the sobering realities of fintech investing – two stories that reveal interesting patterns about how value moves through modern systems.

Telegram: Crypto's Underground Railroad

I've been fascinated watching Telegram evolve from a simple messaging app into what I call "permissionless distribution" – a space where crypto projects can build large, engaged communities without traditional gatekeepers. It's reminiscent of how Hip-Hop spread through underground tape trading in the 80s, but at internet scale and speed.

The platform's growth tells an interesting story. From roughly 500 million monthly active users in early 2021, Telegram has expanded to surpass 800 million active users in 2024. What's fascinating is how this growth has been largely organic, driven by community migration rather than advertising spend. This mirrors the organic growth patterns we've seen in successful crypto projects – communities pulling in more communities.

What makes Telegram particularly powerful for crypto projects is its architecture of closed groups and channels, creating something akin to the spread of samizdat literature in the Soviet Union: information and ideas spreading through trusted networks rather than algorithmic recommendation. When a new crypto project launches on Telegram, it's not just accessing a user base; it's tapping into pre-existing trust networks that can rapidly validate and distribute information.

What's particularly intriguing about Telegram's role in crypto is how it's managed to maintain its position despite regulatory scrutiny and market cycles. While many crypto projects have come and gone, Telegram has become what I call a "permanent infrastructure" in the space – something akin to how record stores served as cultural hubs during the rise of Hip-Hop. The platform's ability to balance privacy with community building has made it indispensable for project launches, especially in a post-FTX world where trust in centralized platforms has eroded. This resilience points to something deeper about how crypto communities form and sustain themselves – they need spaces that are neither fully public nor completely private, but rather exist in a carefully maintained middle ground where information can flow freely while still maintaining community standards.

When Bulls Turn to Bears: A Freetrade Story

This week brought news that hit particularly close to home: Freetrade's acquisition by IG Group Holdings for £160 million. For someone who invested in August 2020 at £2.51 per share, the reported acquisition price of £1.19 represents a 52.59% investment loss for me that serves as a sobering reminder of how startup dreams can collide with market realities.

The broader story of Freetrade's valuation journey tells an even more dramatic tale. In June 2023, the company announced a 65% reduction in its pre-money valuation, dropping from a pandemic-era peak of £650 million to £225 million. Now, with the IG Group acquisition valued at £160 million, we're seeing yet another markdown of what was once considered one of UK fintech's brightest stars.

What makes this story particularly fascinating is the stark disparity in investor outcomes. While early investors might see returns of up to 15x, later participants in Freetrade's nine crowdfunding rounds – including myself and many others among the 20,000 crowdfunding investors – are facing significant losses, in some cases exceeding 80%. It's a perfect illustration of how timing, not just conviction, plays a crucial role in investment returns. While it’s not the outcome I’d like to have - it’s a great learning curve and has led me to revisit my investment thesis towards startups (and crowdfunding opportunities) going forward. For the most part - for the short to medium term I’m going to focus more on businesses and investments I can actively control, manage or operate. Then as a second-order I’ll look to distribute capital to founders I know/admire.

Freetrade CEO Adam Dodds' explanation that "we're now operating in a different market environment where we need to prioritise profitability" takes on new meaning in light of this acquisition. While IG Group sees value in Freetrade's £2.5 billion in managed assets, scalable technology, and brand recognition, for many retail investors, this exit represents a harsh lesson in the gap between growth narratives and sustainable business models.

The parallels between these two stories tell us something important about how value moves through systems. Sometimes it flows through underground channels like Telegram, building authentic communities along the way. Other times, it follows more traditional paths like venture-backed startups, subject to the harsh realities of market cycles. Toni Morrison once observed that "like failure, chaos contains information that can lead to knowledge." My personal 52.59% loss certainly contains some expensive lessons about the risks of crowdfunding, the importance of valuation discipline, and the sometimes painful gap between startup aspirations and market realities.

As we continue to see the lines blur between traditional and alternative finance, it's worth considering how these parallel stories might converge. Will the community-driven growth models of crypto find their way into traditional fintech? Will the profit-focused discipline now being forced on fintech companies influence how crypto projects develop? As Freetrade prepares to operate as a standalone business under IG Group's umbrella by mid-2025, these questions become increasingly relevant for anyone navigating the intersection of traditional and decentralized finance.

Until next week. Peace.

If these reflections on digital distribution and market cycles resonated with you, consider sharing them with someone navigating similar waters.