Detailed Explanation of AC's New Project Flying Tulip Innovative Fundraising: Refund if Not Successful?
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Detailed Explanation of AC's New Project Flying Tulip Innovative Fundraising: Refund if Not Successful?
A new DeFi fundraising model where investors can redeem their principal at any time, and the team earns only through actual revenue sharing.
Navigating Web3 tides with focused insightsAuthor: Griša Černe, Lemniscap
Compiled by: TechFlow
We are excited to announce our participation in the $200 million seed round for Flying Tulip. Flying Tulip is a new initiative launched by Andre Cronje and his team. It is an ambitious attempt to build a full-stack exchange from the ground up, covering spot trading, perpetual contracts, options trading, lending, and structured yield products. While the project's scope is broad, in this article we will focus specifically on Flying Tulip’s funding model—an approach that is breaking new ground.
Motivation and Opportunity
Competing head-on with the giants in the DeFi space is a daunting task. These incumbents are well-funded, have strong recurring revenue streams, and operate with large teams—capabilities far beyond those of lean startups. They benefit from solid network effects, deep integrations, and loyal user bases. Additionally, there’s a “political” dimension: influence over industry standards and partnerships often matters as much as product quality.
Therefore, even if a small startup brings genuine innovation, successfully bringing it to market is an entirely different battle. This is not only a technical challenge but also a financial and social one. Flying Tulip addresses this by rethinking capital formation in crypto. Instead of relying on short-term liquidity or token mechanisms that decay after fundraising, it attempts to build a sustainable funding model that can support operations until the product suite becomes self-sustaining.
Limits of Token-Based Fundraising
To date, crypto tokens have been most successful as a form of crowdfunding: sell tokens, raise funds, launch the project. However, once the initial phase ends, many tokens gradually lose relevance, and their value often trends toward zero as teams struggle to create sustained demand.
Token utility remains an active area of experimentation, but in many cases, tokens primarily serve as financing tools—a role that makes the most sense during the project launch phase, especially before the project evolves into a self-sustaining entity.
Flying Tulip acknowledges this reality and builds a new model around it.
Funding Model
The core idea is simple: raise a large reserve through token sales, deploy these funds into low-risk DeFi strategies, and use the resulting yield to fund operations until the product suite generates its own revenue.
Investors receive Flying Tulip (FT) tokens backed by perpetual put options. As long as they hold the tokens, investors can return them at any time and reclaim their original investment. These put options never expire. Rationally, investors would only exercise the option when the token trades below their purchase price, at which point the tokens are burned.
In effect, the cost to investors is the opportunity cost of about 4% yield they could have earned by directly deploying capital into DeFi. In return, they gain exposure to upside in FT, supported by a structure that minimizes downside risk.
Flying Tulip aims to raise $1 billion. There are no lockups—100% of the supply is distributed to investors at launch. A ~4% annual yield from the protocol treasury translates to roughly $40 million per year to fund operations and kickstart the product suite until fee revenue takes over.
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Investors are protected on the downside
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The team only profits if the protocol succeeds
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Each sale or redemption reduces the token supply
Buybacks and Burns: The Core Mechanism
Revenue generated from treasury yields is allocated toward operating expenses and buying back FT tokens. Over time, fee income from the core product suite will add another source of demand for buybacks.
Notably, if investors sell their FT tokens on the secondary market, their put options become void. Their original capital is then transferred to the foundation and used to buy back and burn tokens. This means that selling not only removes investor protection but actively strengthens the token's deflationary mechanism.
These dynamics combine to make FT a deflationary asset from day one, with multiple reinforcing sources of demand and supply reduction.
Economic Implications
Since the entire FT supply is held by investors at launch, early market dynamics could be highly volatile. A limited float combined with ongoing buyback efforts lays the foundation for strong reflexivity.
Unlike traditional fundraising, Flying Tulip allocates the full supply to investors upfront. Over time, supply gradually shifts to the foundation and ultimately toward burning. In theory, this token could eventually fulfill its purpose and disappear entirely.
Our Perspective
Flying Tulip is not a risk-free investment, but a uniquely innovative endeavor. Its success depends on the team’s ability to manage capital effectively, maintain yield, and deliver a competitive product suite. The cost comes in the form of capital efficiency: investors forgo direct yield, which only makes sense if the project succeeds.
For this funding prototype to succeed, two key factors are critical:
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The ability to raise significant capital, typically led by high-profile individuals or teams with reputation, influence, and trust.
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A product suite mature enough to justify a large-scale launch.
In our view, Flying Tulip possesses this rare combination.
Andre is one of the sharpest builders in crypto—both influential and controversial. His track record of introducing creative prototypes speaks for itself, and Flying Tulip fits this mold: an unconventional approach to rethinking token-based fundraising while launching a product suite that directly challenges industry incumbents.
We support the Flying Tulip team because it represents a genuine attempt to redefine token-based capital formation—one of crypto’s core challenges. If successful, it could accelerate the launch of ambitious projects, make the ecosystem more competitive, and ultimately benefit end users.
This is an experiment filled with open questions. But it is precisely such experiments that drive progress in crypto.
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