Web3 Founder Journey: From 0 to 1
Reflections on founder cross-learning circa 2022 (originally published on Medium Sept 29 2022)
Over the last 3.5 years, we have spoken with 600+ Web3 founders. As they were hard at work building their companies through winter and summer cycles, we observed that they faced a unique set of challenges. These challenges were distinct and different from those of their Web1 and Web2 predecessors. Yet, there has been very little information or guidance out there on how to overcome them.
With that in mind, in the spirit of cross-learning, last week during Messari Mainnet, I interviewed five exceptional Web3 leaders at a soirée event @ the Harvard Club of NYC. The goal of the gathering was to share the “scar tissue” and to discuss what everyone has learned in their Web3 journey.
These five Web3 leaders represent both companies and DAOs across three layers of the Web3 stack — L1s (John Wu, President of AvaLabs), Web3 service layer (Richard Ma, CEO of QuantStamp), and applications (Sid Powell, CEO of Maple Finance, Lucas Vogelsang CEO of Centrifuge, and Michael Carter, CEO of Play.co & Storyverse.
The panelists brought diversity of founding experience — Richard and Sid are first time founders; John, Lucas, and Michael have founded Web2 firms in the past. Some have launched chains, some have launched on chain, some have plans to launch tokens while others have already retired a token.
We received an overwhelming amount of interest with 300+ Web3 founders applying to join the soirée. So, we ran a survey to which more than 50 Web3 builders have responded.
We asked a simple question: what is the #1 existential problem you are facing today?
Here’s what they said:
Legal & Regulatory Challenges — 92%
Finding a Product-Market Fit — 74%
Team Building & Recruiting — 65%
The below are the key takeaways from the discussion organized across these three pain points. For the recording of the panel, you may see my youtube channel here.
1. Solving Legal & Regulatory Challenges
→ You have to know who you are first, before you go ask for an opinion. Are you a company who wants to ask for permission or to ask for forgiveness?
→ By definition, when it comes to legal opinions, answers are likely more flexible. Before changing your product based on the feedback of one firm, try to get a second or third opinion. The type of your law firm you want is the one who can help you architect a solution for the problem you want.
→ Compliance cannot be put on “autopilot” or outsourced. It is the obligation for the early team to have an owner of the compliance strategy.
→ In the deliberation of what to do, in crypto, there are always competitors who try to move very quickly. You might lose, if you take too much time.
→ Ask your lawyer how to mitigate the risk of achieving the outcome you want, rather than asking them for permission.
2. Finding a Product-Market Fit
Build, Ship, Listen, Fix, Repeat…
→ Embrace the “fail fast” MVP mentality and iterate with your audience feedback. Unlike Web2, the process of finding product-market-fit in Web3 is much more iterative.
→ Not only do you have to listen to your customers and your developers, but also to your community — leverage the latter as a source of social signaling to help guide their decisions.
→ Find your niche and build an exceptional product in it.
→ Unlike shipping a Web2 product, in Web3 there is very low tolerance for failure, especially in DeFi. For that reason, you are better off breaking things up in chunks and releasing them sequentially (e.g. V1, V2, etc), after auditing your code.
→ Do as much learning “off chain” as possible, because learning “on chain” could be very costly. Try to validate your idea without writing any smart contract code on chain.
→ In the B2B context, try to sell your product first — for say $250K — before building the product. That is how you can elicit whether the problem you are trying to solve is actually very painful.
‘Finding Your Chain’
→ Optimize for 1. Community 2. Speed, scale, and cost advantages 3. EVM compatibility 4. Execution environment, access points, and tools to make development easier 5. Grants are nice to have, but don’t optimize for that first.
→ Many layer ones are converging to a single architecture — akin to how Sequel did many years ago. For that reason, optimizing for community and users might be the right strategy for you.
→ It is really hard to tell who to bet on. If you make the wrong bet, you will lose just because you chose the wrong chain. Consider going multi-chain.
→ If you do go multi-chain, consider aqui-hiring a team to be able to bring in talent native to that chain. That’s what Maple Finance did.
3. Team Building & Recruiting
→ Team building always starts with a hiring process. The low-hanging fruit is to leverage university networks in search for talent.
→ Look for a “T” structure personality. Look for people who can go deep, but can also be flexible. In other words, can they take their skills outside of their primary area of expertise?
→ There is no magic bullet in hiring. Really talented people are very good at what they do, but can also move beyond their functional area into an adjacent space. See if your good employees can do extracurricular activities.
→ In Web3, there is a huge fight for talent. You have to differentiate yourself by finding people who have a strong connection to what you are doing. The first couple of hires are very important.
→ As your talent grows, you want to make sure they can work together as a team. Use a mission statement for each team — so that it is clear for everyone who to go to for certain tasks.
→ It doesn’t matter if you can recruit a great team. What really matters is whether you can retain them. Retention is all about building a great culture.
Please share your top three existential challenges here. In return, we promise to share the results with you.
If you are building in the Web3 space, I would love to hear from you @materionaut!