On the back of my podcast on the same topic and the recent panel at #EthForAll I thought it may be helpful to write down some points for aspiring Web 3 Founders that I have gathered in my own experiences as an entrepreneur and a VC in Web 3.
Before I start, I have to say that one never truly “fails” as a founder. Yes, over 90% of start-ups fail. However, the experience, the perspectives, and the learning curve undoubtedly make you a better person. I honestly feel that every person should experience entrepreneurship at least once in their life - founder, co-founder, early team member.
Most of the DNA for a founder is similar regardless of Web 2 or Web 3 but there are a few nuances.
With that let me elaborate on certain traits I think are necessary for the Web 3 founder in 2023 - these are not to make you more appealing to a VC but to ensure that you are a Web 3 founder for the right reasons:
Build your conviction in Web 3
You need to show that you are in Web 3 for the tech / ethos, rather than riding a hype cycle. For example:
did you set-up a blockchain club or been a critical part of one;
have you spent time on discord on projects and helped build their business;
were you a key contributor to DAOs;
were you working in Web 3 for at least a year, etc
Needless to say, sh!tposting on twitter or being a defi degen does not necessarily qualify for founder conviction 🙂
Be well researched on Web 3
If you aren’t able to directly demonstrate conviction, you should be able to prove that you know Web 3 fairly well. This is more important for you, the Founder, than I, the VC.
how did you arrive at your problem statement?
how well do you know your market and your competition?
why hasn’t your problem statement been solved so far? For instance, if you are a new options protocol, you should know why haven’t the existing options protocols been able to generate sufficient traction.
Web 3 is here to stay. There will be cycles. It is ok to take some time to research before diving all-in.
Start asking ‘why token’ and not ‘wen token’
A lot of founders are eager to launch a token for their product or network. While a token can be a great tool to bootstrap user traction, premature launches will bring in speculators rather than target users. Token is a powerful tool and ideally launched once the project has an early product market fit with a sticky user base, and when the utility of such a token is clear.
Don’t be forced by VCs or chains to launch your token too soon. Many founders lose focus on their business needs as they become too obsessed or feel guilty over their token price - let that not be you.
Do consider the possibility that perhaps your product may not need a token at all.
Focus on BD / UX, and not just the tech
Before DeFi summer of 2020, there weren’t many users in Web 3. So it was ok to focus entirely on tech and proving that the tech works. Now, while there are second order tech challenges still remaining to be solved, there has to be a lot more focus on tech abstraction and significantly improving user experience.
In addition, business development and distribution are also equally important towards expanding the horizons of Web 3 and bringing established businesses into the fold. No one does this better than Polygon, and you can hear this from ex-Polygon BD Head Arjun Kalsy in our podcast.
Ultimately, tech is an enabler, and decentralisation is an ethos. Users typically move over only when there is 10x improvement, not marginal. And while such improvement is probably still possible through tech improvements, it is definitely possible through experience improvements.
Don’t disregard regulations and legal structures
The wild wild west days of digital assets are mostly over. The era of cheap money is behind us, and regulators have started deeply looking at the ecosystem.
While you should still continue to embrace the ethos of Web 3 and strive to disrupt, do not disregard simple regulations and legalities that can otherwise bite you on your backside. For instance, ensure that your structures are vetted, your equity and token entities are structured appropriately, your money flow abides by money transfer rules, etc.
Again, be wary of any VC or Angel who does not think these aspects are important.
Build your network
Your personal brand and network go a long way today in establishing you and your company. I am personally not a big fan of large conferences as there is too much noise, but hackathons, demo days, dev meet-ups, founder meet-ups, etc are great spots to ideate and start building your network. Jamming with your network can help you build better conviction, refine your thesis, develop a crispier problem statement, address your hiring needs, etc.
Building a network is not easy. You will have to be bold, speak your mind, be ok with being proven wrong, and spend considerable time engaging with numerous people before developing a tight network.
The above list is not exhaustive but things I feel are more relevant to Web 3 founders.
Separately, I would like to point out a few things that I notice on pitch decks that I disagree with:
Your TAM is not your target market - It doesn’t matter at all that the TradFi options market is multi-trillions. What matters more is how you will crack your niche.
Don’t add too many advisors - advisors don't build businesses, teams do. Having a couple of advisors makes sense (with clearly defined milestones), but having advisors for FOMO is ill advised.
Be mindful who is on your cap table - your cap table reflects the perception of your company. A cap table full of investors who are known to “pump and dump” will not be looked at by serious investors.
Don’t preach - ‘banking the unbanked’, ‘decentralise everything’, ‘democratising access’ are some cringe-worthy examples.
Who is your customer? We don’t ask this enough - who will pay for the product / service, how much, and how do you get your first 10-100 users.
And finally, Web 3 founders, if you have read all the way until here, then my final advice to you: It is ok to have a life outside of Web 3 🙂