Crypto founders: if you’re staring at a lot of red right now and wondering what to do about it, here are some thoughts from Sequoia's 50 years of experience, adapted for crypto π
— Michelle Bailhe (@michellebailhe) May 17, 2022
First, embrace reality. We’ve never been here before. Crypto has survived plenty of winters, but it’s never been through a global macro storm yet. Bitcoin was launched in the last global financial crisis of 2008. Crypto has mostly existed in a ~0% US interest rate environment.
— Michelle Bailhe (@michellebailhe) May 17, 2022
Over the last 14 years, crypto has grown tremendously. In prior cycles, it didn’t have nearly the level of complexity or variety of market players (individual & institutional) we do today. We've never had so much attention from users, developers, or regulators as we do now.
— Michelle Bailhe (@michellebailhe) May 17, 2022
So the fact is: We have never been here before. Yes, crypto has survived many winters and bear markets. Yes, this bear market will be similar, but it will also be different in some important ways.
— Michelle Bailhe (@michellebailhe) May 17, 2022
Perhaps you're a founder with a token down 80% LTM, or a last round post you fear you can’t clear, or months of runway left, or you’re wondering what may happen to your customer base… More doom & gloom is not helpful. But neither is hopium. What should you do actually about it?
— Michelle Bailhe (@michellebailhe) May 17, 2022
1: Don’t panic, but do plan. This is the time for diamond hands, not necessarily on your personal portfolio, but of your company/protocol/team. You need thoughtful, decisive action this month, not this minute. Stay the course, but plan for choppier waters.
— Michelle Bailhe (@michellebailhe) May 17, 2022
2: Recognize the funding environment has changed. VC funding is no longer on tap. Control expenses accordingly. Several big crypto funds were just raised, so it’s possible crypto does better than tech, but it's also possible it doesn't. It’s not your fault, but it is your problem
— Michelle Bailhe (@michellebailhe) May 17, 2022
3: Talk to people who have actually made it through a trough and come out stronger on the other side. They may be boomers! :) Most crypto cap tables are utterly devoid of anyone with first-hand experience navigating this type of environment. Ignore the investors who get jumpy.
— Michelle Bailhe (@michellebailhe) May 17, 2022
4: Ask hard and painful questions: First, do we actually have product-market fit? Many founders are product people, so asking this question is particularly painful. Emission-incentivized usage or grant-incentivized development masks product-market fit.
— Michelle Bailhe (@michellebailhe) May 17, 2022
5: Second, ask: do we have a sustainable business? "Token go up" is not a business model. Native coins for L1s/L2s to secure a network are a different story. But if you're an application and you've only funded your business through VC $ and tokens, you have planning to do.
— Michelle Bailhe (@michellebailhe) May 17, 2022
This doesn't mean turning on fees overnight, especially for network effect businesses or if you have plenty of runway. But you need to look at your runway and have a plan. Crypto/web3 is about better aligning incentives & rewarding users/creators - not denying the laws of physics
— Michelle Bailhe (@michellebailhe) May 17, 2022
6: Invest wisely. There is almost always 10-20% of spend in S&M and G&A that can be cut. When it is, you end up more, not less, efficient. Most crypto teams are lean, but there is still likely excess spend or initiatives. Focus precious calories on the most important things.
— Michelle Bailhe (@michellebailhe) May 17, 2022
7: Keep your foot on the accelerator in core R&D. This was one of Sequoia’s most important learnings from '08 - trim elsewhere but double down on product. Put distance between you and your competitors. When you reach the other side, be the strongest positioned.
— Michelle Bailhe (@michellebailhe) May 17, 2022
8: Hire a great CFO. CFO is perhaps the most under-appreciated role in crypto. Honestly, I don't know why. A good CFO does not sit around and tell you not to spend money, they help you invest wisely. Get a great CFO ASAP.
— Michelle Bailhe (@michellebailhe) May 17, 2022
9: Chart a path towards sustainability. You need a path to a sustainable business without VC infusions or retail propping up your token. Look honestly at the time you think it will take you to get there. It may be >2 years. If you only have 12 months of runway, you need to cut.
— Michelle Bailhe (@michellebailhe) May 17, 2022
10: Seize the opportunity. Times of turmoil separate the wheat from the chaff. The strongest companies get stronger. As the weak collapse around them, the strong poach their best people, win over their users and acquire their IP & licenses.
— Michelle Bailhe (@michellebailhe) May 17, 2022
This is a time to extend your advantage and cement market leadership, but you need to survive long enough to have that chance.
— Michelle Bailhe (@michellebailhe) May 17, 2022
These lessons are from people who actually have operated & invested through several market cycles @roelofbotha, @Alfred_Lin, @carl_eschenbach, @dougleone, & the wise advice of @shaunmmaguire, @GuptaRK22, @gradypb, (**corrected**), @andrew__reed & more. All credit goes to them.
— Michelle Bailhe (@michellebailhe) May 17, 2022
These lessons are from people who actually have operated & invested through several market cycles @roelofbotha, @Alfred_Lin, @carl_eschenbach, @dougleone, & the wise advice of @shaunmmaguire, @GuptaRK22, @gradypb, (**corrected**), @andrew__reed & more. All credit goes to them.
— Michelle Bailhe (@michellebailhe) May 17, 2022
These lessons are specifically from people who actually have operated & invested through several market cycles @roelofbotha, @Alfred_Lin, @carl_eschenbach, @dougleone, and wise advice from @shaunmmaguire, @GuptaRK22, @patgrady, @andrew__reed & more
— Michelle Bailhe (@michellebailhe) May 17, 2022
https://t.co/IAJ7zAEDTh #cryptowinter
— Paramendra Kumar Bhagat (@paramendra) May 17, 2022
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