The Tom Woods Show #1198: TEST — A Market Alternative to the FDA
In popular discourse, consumer safety is one of the most frequently cited reasons for government oversight. Neil Thanedar, my guest today...
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There were 456 food recalls in the U.S. last year.
Counterfeit goods are a $461 billion global industry.
Consumers can’t answer key questions about product quality.
The TEST Registry is a curated list of products that meet quality standards. Products that join this registry and pass TEST analyses are "TEST Certified".
TEST holders stake a deposit of TEST tokens to apply a product to the TEST Registry. Staking a deposit begins the application period, where other TEST holders can challenge an applicant that they believe is not up to the standards of the registry or fraudulent. Product challenges are won or lost based on scientific testing performed by a TEST-registered laboratory.
Consistently high quality products will be rewarded with increased sales and brand trust.
A decentralized network of labs ensures that test results are unbiased and reproducable.
Token holders self-regulate the TEST registry through an open, transparent challenge process.
Consumer applications for TEST will not require token ownership, simplifying adoption.
Centralization in the testing laboratories industry has made it difficult for smaller labs to earn new customers. There are over 16,000 testing laboratories in the world, generating over $78 billion in annual revenues; however, just 10 companies (average age = 112 years old) control over 40% of the global market share. By incentivizing laboratories to join the lab registry and publicly share their testing data with the product registry, TEST will increase transparency and promote more independent testing.
TEST can incentivize public quality control in the largely unregulated supplements market.
TEST can proactively regulate food quality and reduce the risk of recalls through public testing.
TEST can help producers fight fraud by equipping consumers with tools to verify product authenticity.
TEST can be the first public source of cannabis testing data powering applications across all borders.
Labdoor is the first of many data providers and application developers for the TEST network, providing immediate utility to early adopters.
This offering is a TEST Foundation debt offering, payable:
Investors do not receive any equity interest or ownership in TEST Foundation or any of its affiliates. Repayment obligations are set forth in and limited to the terms of the DPA Agreement. Key repayment terms are listed below but are qualified entirely by the terms of the DPA Agreement.
Please carefully review the entire DPA for complete terms, as well as the risk factors set forth in the "Risk" section down below. Also, do not hesitate to ask for clarification using the discussion box at the bottom of this offering page.
JOIN THE TEST NETWORK
The smallest investment amount that TEST is accepting.
Token DPA (Late Stage with Escrow)
If the campaign is successful, you’ll receive a Token DPA for your investment.
The DPA is not equity or a token itself, but a loan that payable in tokens in
the future, with interest.
If the campaign is successful, you’ll receive a Token DPA for your investment. The DPA is not equity or a token itself, but a loan that payable in tokens in the future, with interest.
The amount of time TEST has to pay out your investment in tokens.
If the DPA isn't repaid with tokens after that time, it will be payable in cash
The interest amount that will accumulate on your investment
if it’s paid back to you in cash.
The interest amount that will accumulate on
your investment if it’s paid back to you in tokens.
50% of net debt amount before 2 years
How much you can get back of your investment if you choose to cancel
the Token DPA before it’s paid back.
$100,000 – $1,070,000
TEST needs to raise
before the deadline. The maximum amount TEST is willing
to raise is $1.07M.
TEST needs to reach their minimum funding goal before the deadline
If they don’t, all investments will be refunded.
TEST Foundation will manage protocol governance for the TEST protocol and registries, including parameter settings and testing standards. TEST Foundation will also enlist a decentralized network of laboratories to join the lab registry and perform work for the product registry.
Neil: Hi, I'm Neil Thanedar, I'm the founder of TEST. What TEST does is it tests the quality of vitamins and supplements. I have a 16 month-old son, Kai. We've already started looking at vitamin D supplements for him. When you go into the store, there's hundreds of options, and you can't read hundreds of labels and see those thousands of ingredients, and actually have a sense of, "what product should I buy?"
Neil: Being able to have a company that does all this for you, now you can be much more safe and secure knowing that you're making the right choice.
Neil: I'm really excited to be here. I've seen a lot of TV shows like this. It's always so easy to kind of sit on the couch and, you know, judge or critique the founder who's out there. Being able to do that myself and being able to step into that position and play the game is really exciting. For Kai and for the millions of other kids, for every single person. We wanna make sure that we do as much testing as possible. We bring as much transparency and trust into a market that really needs it.
Neil: How many of you take vitamins or supplements? We're all like the majority of Americans who are taking three, four, five supplements or more a day. The crazy thing is even though there's over 466 billion dollars per year sold in the US, the FDA does not actually review the safety or effectiveness of those products before they're sold. So that means that your probiotic, or your fish oil, or your protein powder isn't actually analyzed or tested prior to you consuming it. And that's why I created my first start-up, Labdoor.
Neil: We tested over 1,000 supplements. We found gummy vitamins that have had yeast and mold in them; we found fish oil that was rancid on shelves. There's over 30,000 new products like this that are cerated each year. And for any one organization to be able to test that, we're gonna have to bring in many more labs and recruit many more companies to work with us, to sponsor the cost of this testing.
Neil: So we looked at a token-curated registry model, using a token called TEST to actually incentivize that work. The way TEST works is that companies will pay a fee in tokens to apply to the registry. Laboratories or other challengers could actually challenge the quality of that product by staking their own tokens down, and whoever won that challenge would keep the tokens, right?
Neil: And that really incentivizes the companies to play ball the right way. It incentivizes the right companies to come in and work with a system. It penalizes companies that are cheating on the system, and then what we end up being able to do is really, be able to reward the companies that have the best product, call them TEST certified. So that's why we're raising a million dollars through crowdfunding, so we can have as many people as possible, making that decision on which product should be tested.
Tim: Is the million dollars to buy tokens? Or is the million dollars to invest in your company?
Neil: So, it's to buy tokens.
Tim: So, you have gamified the stamp of approval. What if they decide not to play your game?
Neil: Right. So, there's a few things that we're gonna do. One, we're gonna keep a lot of the tokens where we can basically pay for independent testing. Really, we think of the labs as like the miners in this situation. They're doing this very valuable work to secure the network, and so we can actually pay them out of our own tokens to do that, if we see that companies aren't being challenged. And so, one of the things we'll do is we'll let token-holders vote on which product should be independently tested in this way.
Bill: Why aren't you dealing with dollars? Why are you dealing with tokens?
Neil: There's a major pricing power difference. So, the value of the certification itself would fluctuate based on the demand for the token. There's a number of different token curator registries like Adchain and Messari that have used this system. What ends up happening with something like a credit-rating agency, for example, is you're incentivized to take as much business as possible because you get the same price for every certification. And so, over time, you dilute the quality of your registry. Right?
Neil: And so, in this case, by actually saying, tying into the value of the tokens, you actually have to continuously increase the value of that registry, otherwise the value of the tokens goes down.
Naveen: You're not doing your own testing, so you're literally just simply a marketplace for the testing labs, and the product company, and the someone who says, "I wanna challenge this company because I don't believe they are good."
Neil: I think that it's really important to decentralize the connection between the people who are paying for the testing and the people who are performing the testing.
Tim: Is there a reason for an individual to wanna buy a token? Do I wanna buy a token for any reason?
Neil: You don't necessarily have to, right? So-
Tim: Maybe aggregate, in aggregate we can buy enough tokens to challenge a-
Neil: Yes, so this is one way we can crowdfund the testing of the products too. So people could actually put down deposits saying, "if we get enough money, we'll actually go out and test this product." Another great part of it is the average consumer would not need to own any tokens for this to work, right? They would just be able to go to the store and see that this product's been tested and that's it.
Neil: We wanna be, working with a system to where, where there might be thousands of people who are in the challenging process, but there'll really be millions of people who can benefit from this service. And it's one big way for blockchain technology to impact millions of people without them necessarily having to hold the token.
Naveen: How do you know how many tokens to charge? If you're doing a multivitamins that have five hundred different vitamins and minerals.
Neil: The most classic testing would be purity testing. So, those are very standardized tests. So they'll be testing the same way every time. So every product would have the same cost. Multivitamins are actually one of the hardest things for us to test. We've still tested close to a hundred products, it just was much more expensive with many thousands of dollars instead of one or two thousand dollars for a simple product.
Neil: So, California cannabis became legal and there's now testing that's required. So companies actually don't have a choice anymore in that industry. They're gonna be require to do the testing anyways. And so they pick TEST instead of one of the private labs, they not only get the benefit of the testing being done for the regulation, but they actually get a public marketing benefit out of that as well.
Tim: Why do you care? And what's the big vision here?
Neil: Yeah, so I'm a chemist. My first business, we built a testing lab. Our specialty was recall analysis. So when a product was about to fail, they would come to us and we would figure out exactly why the product was failing. I saw hundreds of different products, from the cosmetics or supplements that could've easily could have made thousands of people sick, and we were using an emergency room-style system. We were waiting for the company, the product to get sick, and then we tried to fix the problem.
Neil: And I said, "look, the entire industry should work the opposite way." There should be an independent organization that should test all of these products at the beginning., and if we knew from the very beginning, whether these products were good or bad. Then consumers were now driving the decisions.
Neil: These are important health products. It's just the right thing to do, and the FDA is missing a lot of these products. Consumers really need an advocate for them, and we really think we could do that.
Bill: How long have you been in business?
Neil: So, we've been working on this for five years.
Bill: At this point, what is your revenue?
Neil: So, Labdoor's revenue was just over a million dollars last year.
Tim: Labdoor, but that's different from TEST.
Neil: So TEST, yeah. So our token hasn't launched yet.
Tim: I see.
Neil: So there's no revenue from the token.
Tim: And does the company own the token?
Neil: So, the company owns 30% of the token,
Tim: And the other 70% go to new investors.
Neil: New investors and to grants [crosstalk 00:21:06]
Tim: New buyers of token
Neil: And we'll be able to build our incentives through that too.
Naveen: Very good.
Neil: That was good.
Tim: Thank you for coming to Meet the Drapers.
Neil: Thanks guys.
Neil: I think I just got really excited out there, so it was just a lot of fun. It went a lot faster than I thought. I wish I could've explained our token earlier, I think since we got through that point, the rest went a lot easier. We definitely saw some excitement from at least two of the judges. Tim Draper could be the most interested in being able to invest. Once we're able to explain why our token is important, I could really see his eyes perk up.
Neil: I was really excited to be able to have an audience of all of these great [inaudible 00:21:37]. If you take these products, if you felt this problem personally, join our campaign on Republic. Help make us test every product in the world.
Neil: To all those viewers out there, give a thumbs up for TEST.
Tim: Well, let's see what the judges think of TEST. But just know that, you, the viewer, have the opportunity to buy some of these tokens and you do it just by going to meetthedrapers.com.
Tim: So what do you think, guest judge?
Naveen: Well, I like the guy. I really felt that he has a good energy, had a good passion, at least he talked through the problems. So, personally, I like him as an entrepreneur. Business model makes a lot of sense. I mean, someone needs to do it. So I feel good. I mean, I really think there's a market here, and I really think he had a shot at doing it. We forgot to ask him about his team; this needs to have a great team.
Tim: How about you Polly?
Polly: Well he had me at moldy gummy bears. [crosstalk 00:22:39] I was just like, 'oh my god, I want all my vitamins tested.' I liked the theory, which is that you don't want a lab that's got a vested interest. But, on the other hand, do you know what the lab-
Bill: Do you really think it's needed?
Polly: I definitely think it's needed.
Naveen: Even if you test the product once, it is every batch that really-
Polly: That's true.
Naveen: Most of the problem happens is not in the product itself. During assembly line they get something moldy coming in, or something poison coming in.
Polly: Because then once they got their stamp of approval they could quality control down
Bill: That's a good point.
Tim: I like the idea that if you're selling fish oil and I'm selling fish oil, I'm gonna spend the whatever 10,000 dollars a month to make sure his gets tested.
Naveen: Every month.
Tim: Okay, lets go to the crystal ball, and let's just see, let's test the crystal ball. And so, everybody have a vibe? Okay. You guys can play along at home. Thumbs up. Thumbs down. Thumbs all around. One up, one down, two sideways. This is a winner.
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