I’ve been an investor for a few months now, so naturally I have no idea what I’m doing just yet. Thankfully, I’m investing in Bitcoin companies, an industry that also has no idea what it’s doing—although we’re both starting to figure things out.
Over the last few months, I’ve probably met with 100+ Bitcoin companies and founders. The vast majority of these are very early stage, pre-launch, and working with a team of 1 or 2 people. It’s worth noting that the quality of founders working on Bitcoin-related technology is getting noticeably better every month. So despite the ups and down of Bitcoin itself, I’m very excited about what’s out there and what’s yet to be built.
As we leave the peak of inflated expectations (the run-up in November 2013) and enter the plateau of productivity (summer of 2014) I have some tips for the many bitrepreneurs out there. Let’s hope these few notes save some agony—and perhaps spare me a bad pitch. 😉
Branding is tough. More so when you’re doing it an emerging industry that is also highly technical. In my experience, it takes years before sophisticated brand marketers enter new industries. Bitcoin’s not anywhere near that point yet. In the meantime, I have just one recommendation (and one favor to ask): please, avoid using the words “bit,” “block,” or “coin” in your company’s name. These words are used so often that it’s causing consumer (and investor) confusion. This is especially difficult for investors who look at a lot of companies. For example, I’m an investor in both Gocoin and Gogocoin. If someone comes to me with Gogogocoin, I might just fund that—but please don’t.
Instead of confusing us, you want to create a unique and memorable brand name. Something that’s easy to remember, pronounce, and of course look up on Google. Ideally, it’s a single word with four or five characters. Some recent good examples in the Bitcoin space include Circle, Xapo, and Chain. If you tell me your company name and I can’t remember it a minute later, that’s a branding fail.
Solving Problems Too Far Downfield
Bitcoin is still super early. So it’s certainly possible to be too early on many business ideas, especially if your idea is going to take immediate scale to be sustainable. That scale simply doesn’t exist today, and it’s likely to be 2–5 years before it does.
Today, we’re probably best served by solving the immediate needs around ease of use, infrastructure, and user onboarding. Save the long-shot science fair projects for next year, when the market matures and addressable audience grows. If your company runs out of money before the demand arrives, you obviously won’t be around to reap the benefits.
Your Office Is An Airport
I’m starting to see a similar trend in Bitcoin to one I saw when social media started to become a Thing. Wayyyy too many conferences and other events.
I think there are two things that drive this in emerging industries. The first is the need to form a lot of in-person connections to drive the online ones. Second, the events industry is very good at jumping on new trends and spinning them into a dizzying number of places for you to spend money. Promoters and planners quickly perfect the price points along with event cadence, and before you know it you’re spending more time traveling then building your business.
I don’t want to downplay the importance of networking at conferences; I certainly do it myself. However, I don’t try to make every event like I see some Bitcoin industry leaders doing these days. We all appreciate their evangelism, but eventually it gets to the point where you’re simply saying the same things to the same people over and over again. We’re at that point now.
And for the founders out there, all that money you spend on travel is money you’re not spending on your company. Most first-time founders also don’t understand that distance from your staff can be really damaging to your business and to team morale. They need you here, on the ground, if you ever want to get to the moon.
IPO Schemes and Fundraising Fails
Finally let’s talk about what this is all about: money, and changing how money works. Naturally, given the nature of the industry, we’ve seen a few new approaches to fundraising, including IPO schemes that leverage crypto technology in some way. I would say this is the biggest red flag that the business or idea is doomed to fail. Some recent examples seem to confirm that. The IPO is a vehicle for mature companies, not early-stage startups and pre-launch products. Kickstarter or other crowd-funding platforms make a lot more sense than IPOs if you need funds and product validation before talking to angels and investors.
Fundraising probably requires a longer post of its own. Fundraising is incredibly difficult for most startups, and it’s even more so for companies in emerging industries like Bitcoin. The best advice I can give is to keep things lean and mean until the market matures and more investors become available. Today, your best plan of action is to launch an MVP (minimum viable product), raise an advisory round of $100K–$500K, and be able to sustain yourself for the next 12–18 months. If you can start to show things are working in that time, you might be able to raise a more substantial round and be off to the races.
Good luck out there on the chain founders. Working on something interesting? Contact me and let me know.