Tampa’s Pocket Network was once a $1 billion unicorn, eyes rebounding from the crypto crash

Even by the up-and-down standards of the Web3 industry, Michael O’Rourke had a wild first half of the year.

“Greece, Spain, Amsterdam, the Dominican Republic, Colombia, Argentina, France — I was home probably a month and a half out of six months,” said the founder and CEO of Tampa blockchain services startup Pocket Network. For the rest of 2022, “outside of things I actually have to be at, I’m going to be at home here in Tampa.”

Even at home, it probably won’t slow down anytime soon. Since launching its services two years ago, Pocket Network has become one of the most popular tech companies in Tampa, raising more than $22 million in funding and building partnerships with developers around the world.

A major highlight came in January, when the company received an estimated valuation of $1.5 billion, making it a rare unicorn in Tampa’s evolving startup scene. O’Rourke said that based on the value at the time of POKT — the internal token that developers must stake to connect to a blockchain through Pocket — the company was actually worth closer to $3 billion. But then POKT’s value fell next to Bitcoin, Luna and other cryptocurrencies. While startup tracker Pitchbook still has it listed as a unicorn, Pocket’s current market cap is closer to $100 million — no small feat in itself.

O’Rourke — who graduated from Wharton High School and the University of South Florida — still believes in the democratic, decentralized power of Web3, a version of the Internet built on blockchain technology and the cryptocurrency market. Headquartered in Tampa startup hub Embarc Collective, Pocket has 57 employees in 15 countries, is eyeing another round of funding this fall, and O’Rourke believes it could be profitable by the end of 2022.

“The important part is that we’re actually building marketplaces where others can come in and participate, not just us,” he said. “I see this as us building a country, less a company.”

On a recent call, O’Rourke, 33, talked about Pocket Network’s rise and valuation, the state of the cryptocurrency industry and more. AThis interview has been edited for length and clarity.

Do you have an elevator pitch for Pocket Network? How do you describe what it is to people who have no idea how blockchain works, or even what it is?

When you load a web page and it takes half a second or a second, we are the thing you use to load that data on your web page. In our case, there are specific Web3 applications such as wallets and games and DeFi (decentralized finance). This data comes from services such as Pocket.

Can you give me examples of how companies are using Pocket’s technology?

Many DeFi apps use us. I think the biggest one is Aave. When you go to the Aave website and you see your ethereum balance or your Aave token balance, part of it comes from Pocket.

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Philosophically, what drew you to decentralized technology and infrastructure?

That’s a good question. I was born in the Dominican Republic but raised here and I have used Western Union a ton of times to send money to my family because they all live in the DR. I worked in a couple of local credit unions here, selling loans. I looked at thousands of credit reports and I saw how difficult financial systems can be for people. Then 2013 was when I started bitcoin and I really started to believe in it. I became a developer and started working with different APIs (application programming interfaces), whether it was Google, Twitter, Facebook. And you can see how for things that are effectively public goods, but run by individual managers, they make just one change and it screws everything up.

Did the pandemic act as a speed bump in your development?

No in the development (of Pocket), yes in the prospects for funding, at least at the time. We had to cut wages by 20 percent. We did it for 10 months. We ended up launching in July 2020 with about two and a half, three months of runway left. And that’s when we actually managed to raise around $9.5 million. Once we launched it and proved it worked, they said, “Okay, these guys actually think they can build it.”

Market values ​​and valuations are always a bit tenuous, because you never really know how much a company is actually worth. If Pocket’s valuation was $2.5 billion or more in January, and now it’s $100 million, it’s not like you’ve lost $2.4 billion. But it is a big change. What does it mean to you that that valuation has changed so dramatically?

It doesn’t matter to me, apart from certain conversations with (cryptocurrency) exchanges and custody providers. My view is that if we build something useful, if we build a sustainable two-sided marketplace, the value will fall to that. I’ve been in this space long enough to see 95, 98 percent corrections, and I don’t really care. So in the long term, the price doesn’t really matter. If we build value, it will follow.

Is the decline in Pocket’s valuation a function of the cryptocurrency crash of the past six months?

When we were listed (on cryptocurrency exchanges), we became quite correlated with the rest of the market. It is also a result of the cost of the network, actually. At one point, the network cost – and when I say cost, I mean the cost of the infrastructure that people run to run the network – somewhere in the range of $40 – $45 million a year. There is a lot of sales pressure to cover costs. It triggered the community and us to find better efficiency for the network. We sacrificed efficiency for distribution, effectively. We wanted to prove that this network could operate on a large scale, and now we are moving towards efficiency and sustainability.

If the biggest blockchain story in the first half of the year was cryptocurrency and crashes, the biggest blockchain story in the second half of the year will be…?

Regulatory Scrutiny. Across the board, would be my guess.

Does it occupy you?

Not us. We are not in DeFi. We have really done everything as well as we can. We operate in a gray area. If we get a love letter from the SEC, we’re happy to show them everything, but it doesn’t concern our room so much. It worries me more at the level of regulating stablecoins, DeFi, that kind of thing. My concern is blanket things rather than sensible things.

Has the year affected you outside of work? You’ve been investing in bitcoin for a long time, so your personal wealth has likely declined along with it.

Last year I sold everything and bought Pocket. So I go down with the ship.