2020 Letter to Shareholders

To our shareholders:

Aka “Hello, World!”

Awake achieved many milestones in 2020: by year-end, we had operations or were in process of setting up operations in the following countries: USA, India, Canada, UK, Poland, Nigeria, South Korea, South Africa, and Brazil. This represents an 800% increase from where we were in 2019. No startup in the history of technology will roll out to more parts of the world faster than Awake. These first nine countries are fleshing out the template for the rollout to the next 50 countries. Multiple Awake Coseller Networks (or just Awake Networks) are launching across these geographies as this goes to press. 

But this is Day Zero for The Actual Internet and, if we execute well, for Awake. Today, especially after COVID-19, Awake Networks save customers money and precious time. Tomorrow, through true human-assisted Artificial Intelligence, Internet commerce will accelerate the very process of creation, far beyond just discovery. Awake uses the Internet to create real value for its customers and, by doing so, hopes to create an enduring franchise, even in established and large markets. We do this by giving every Internet citizen the opportunity to become an Awake Coseller, and to make money by promoting any product or service across the Internet. We enable entrepreneurs all over the world to create Awake Networks that organize the Awake opportunity into hyper local and global Coseller Networks. 

We have a window of opportunity as larger players marshal the resources to pursue the Retail 2.0 opportunity and as customers, some still new to purchasing online, are receptive to forming new relationships. The competitive landscape has continued to evolve at a fast pace. Many large players have moved online with credible offerings and have devoted substantial energy and resources to building online brands. Luckily, we’re innovating and deploying Retail 3.0 solutions at a faster pace.

A prime example to watch is in India where Facebook and Google, along with sovereign wealth funds and the like have poured in $11B into Reliance Jio Platforms. Even as this unfolds, it is a fact that the battle for the consumer has only just begun, and this coming decade represents the wholesale digital transformation of our world. Vast fortunes are going to be made and lost in this fourth wave of this Internet-enabled Industrial Revolution.

Our goal is to move quickly to solidify and extend our current position while we begin to set up Awake Coseller Networks in every area. We see substantial opportunity in the large markets we are targeting. This strategy is not without risk: it requires smart capital and focused investment alongside crisp execution against established franchise leaders. How many startups take on the FAGA crowd at once?

It’s All About the Long Term

We believe that a fundamental measure of our success will be the shareholder value we create over the long term. This value will be a direct result of our ability to extend and solidify our current market leadership position. We will do this because most others do not truly understand what a network-of-networks signifies, particularly in the traditional terms they are used to. Some have studied the network effect of companies such as the FAGA crowd and also Alibaba and others, but no one has created a Unified Internet, in order to create an entirely new network model, which functions at N-to-the-power-of-N dynamics. The world has witnessed the growth of Amazon, but no one has seen the build out of an Amazon of Amazons. Awake makes launching a market network down to a 1-click experience.

The stronger our market leadership in this new category, the more powerful our economic model. Market leadership can translate directly to higher revenue, higher profitability, greater capital velocity, and correspondingly stronger returns on invested capital.

Our decisions have consistently reflected this focus. We first measure ourselves in terms of the metrics most indicative of our market leadership at this point in our growth curve: core network growth across our core network protocols, the number of entrepreneurs launching new network verticals, and the strength of our brand. 

Because of our emphasis on the long term, we may make decisions and weigh tradeoffs differently than some companies. Accordingly, we want to share with you our fundamental management and decision-making approach so that you, our shareholders, may confirm that it is consistent with your investment philosophy:

• We will continue to focus relentlessly on our entrepreneurs, cosellers, and consumers.

• We will continue to make investment decisions in light of long-term market leadership considerations rather than short-term profitability considerations or short-term Wall Street reactions.

• We will continue to measure our programs and the effectiveness of our investments analytically, to jettison those that do not provide acceptable returns, and to step up our investment in those that work best. We will continue to learn from both our successes and our failures. Luckily, Awake is built upon Opentangle, allowing us to create a truly data-driven enterprise with inherently powerful AI capabilities that will aid in creating this learning organization.

• We will make bold rather than timid investment decisions where we see a sufficient probability of gaining market leadership advantages. Some of these investments will pay off, others will not, and we will have learned another valuable lesson in either case.

• When forced to choose between optimizing the appearance of our GAAP accounting and maximizing the present value of future cash flows, we’ll take the cash flows.

• We will share our strategic thought processes with you when we make bold choices (to the extent competitive pressures allow), so that you may evaluate for yourselves whether we are making rational long-term leadership investments.

• We will work hard to spend wisely and maintain our lean culture. We understand the importance of continually reinforcing a cost-conscious culture, particularly in a business incurring net losses.

• We will balance our focus on growth with emphasis on long-term profitability and capital management. At this stage, we choose to prioritize growth because we believe that scale is central to achieving the potential of our business model.

• We will continue to focus on hiring and retaining versatile and talented employees, and continue to weight their compensation to stock options rather than cash. We know our success will be largely affected by our ability to attract and retain a motivated employee base, each of whom must think like, and therefore must actually be, an owner. Luckily, thanks to the nature of the Awake portfolio of companies, and the Orgtype company structure, we have been able to attract dozens of top industry leaders around the world to take on senior management roles within Awake, or to launch and drive new Awake Coseller Networks. We expect this entrepreneurial model to push the boundaries of what is possible with growing talent.

We aren’t so bold as to claim that the above is the “right” investment philosophy, but it’s ours, and we would be remiss if we weren’t clear in the approach we have taken and will continue to take. With this foundation, we would like to turn to a review of our business focus, our progress in 2020, and our outlook for the future.

Obsess Over Entrepreneurs and Cosellers

From the beginning, our focus has been on offering our entrepreneurs and cosellers compelling value. We realized that the Internet was, and still is, the Inter-network of Networks. Therefore, we set out to offer entrepreneurs something they simply could not get any other way, and began serving them with a 1-Click Internet Business Operating System. An example of such a network is Veed, which is Awake’s foray into the global cannabis market. 

Thanks to our virtual supply chain, Veed was able to onboard billions of dollars of inventory without touching a single physical object. Before the marketing launch, without a sales team, the founders were able to onboard product selection from more than 3500 dispensaries across the United States, as well as bring on top Fortune 5000 brands from across North America.

By many measures, Awake came a long way in 2020:

• Awake went from 1 country to 9.

• Awake’s employee base grew from 1 in 2019 to 50+ in 2020, working across product engineering, sales and business development, as well as corporate strategy, and we significantly strengthened our management team.

• Awake went from 0 operational networks to 3 live (including Veed), and dozens in the works.

Protocols

During 2020, we worked hard to expand our Internet Protocols infrastructure to support the new model of building market networks:

• Opentangle – Knowledge Protocol 

• Awake Me – Identity Protocol

• Awake Market – Market Network Protocol 

• Awake Money – Asset Protocol

• Awake X – Exchange Protocol 

And we built several market networks that are in various stages of going live:

• Veed

• Spiritful

• Corner Network

• Indiful

• Sonakey

• CoventureCap

• Toontype

• Super Cab

• CatrovaCer

We are building out the next few layers as well, and we’re very pleased with our strong foundation for 2021.

Our Employees

The past year’s success is the product of a talented, smart, hard-working group, and I take great pride in being a part of this team. Setting the bar high in our approach to bringing people in has been, and will continue to be, the single most important element of Awake’s success. It’s not easy to work here (when I interview people I tell them, “We give you every opportunity to unleash your potential in a safe and supportive and ambitious environment, and the results of your efforts will drive your success at Awake, everything is tracked by Opentangle, many people love the opportunity, but it isn’t for everyone”), but we are working to build something important, something that matters to our customers, to entrepreneurs, to humanity, something that we can all tell our grandchildren about. Such things aren’t meant to be easy. We are incredibly fortunate to have this group of dedicated individuals whose sacrifices and passion build Awake.

Goals for 2021

Awake has built a layer of software on top of the existing Internet, creating a new virtual Internet that enables a new type of economic model, one that is accessible to all, and works for everyone. We are still in the early stages of learning how to bring new value to the Internet through this new FinTech AI, creating millions of new sales and merchandising networks for media and e-commerce. 

Our goal remains to continue to solidify and extend our brand and customer base. This requires sustained investment in systems and infrastructure to support outstanding Internet businesses and their growth. We are planning to add dozens of new categories in the US alone, to add to Veed, and over time we believe that all categories will become investible, either by Awake directly, or by investor networks building on top of Awake protocols. We also believe there are significant opportunities to better serve entrepreneurs overseas, such as 1-click licenses for SaaS based business-as-a-service such as Veed. To be certain, a big part of the challenge for us will lie not in finding new ways to expand our business, but in prioritizing our investments.

We now know vastly more about how to set up Awake Coseller Networks than when Awake was founded, but we still have so much to learn. Though we are optimistic, we must remain vigilant and maintain a sense of urgency. The challenges and hurdles we will face to make our long-term vision for Awake a reality are several: aggressive, capable, well-funded startups; considerable growth challenges and execution risk; the risks of product and geographic expansion; and the need for large continuing investments to meet an expanding market opportunity. Not to mention, FAGA: Facebook, Apple, Google, and Amazon, who do not know of our existence yet, but will very soon. 

However, as we’ve long said, the cannabis market in particular, and Awake Coseller Networks in general, compose very large markets, and it’s likely that with Awake a very large number of companies will see significant benefit. We feel good about what we’ve done, and even more excited about what we are about to do.

2020 was indeed an incredible year. We at Awake are grateful to our cosellers and entrepreneurs the world over for their trust, to each other for our hard work, and to our shareholders and cosellers for their support and encouragement.

Amit Rathore

Founder and CEO, Awake

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