How Bitcoin Startups Can Survive in the Unicorn Era

John Biggs is a writer and editor living in New York. After working as a programmer for many years, Biggs decided to become a full-time journalist. His work has been published in journals such as The New York Times, Gizmodo, and Men's Health.

Biggs is currently an editor at TechCrunch and the CEO of Bitcoin stealth startup Freemit. Here, he discusses the challenges of raising Bitcoin and blockchain venture capital in the current economic environment.

Having read many, many excellent (and often very basic) digests on the “unicorn apocalypse,” have you ever assumed that venture capitalists have decided to pack up their clothes and go to Montana to hibernate?

This panic is largely unfounded, especially when it comes to fintech funding.

First, everyone knows that PayPal was founded in a bad economy. Carry this information with you like a talisman against the darkness: in times of slow growth, those who can save consumers money or reduce friction for small transactions will ultimately be the winners. This is very important. Help those who need your help the most, and they will repay you in the future.

Second, don't forget that VCs make a lot of stupid bets. Very stupid ones. If you look at TechCrunch over the last few months, you'll see startups that will do everything for you except tie your shoelaces before you leave the house. Look, there's an Uber parked outside to gas up your car.

But those dumb bets didn’t really contaminate the market. You can think of this as a reset of the VC mindset. VCs who had been waiting for the right time over the past few years weren’t making strategic bets too early and diversifying too much, they were still looking for solid business models that were investable.

New funds are being generated and need to be invested.

Don't panic

There is a basic concept that we should not ignore: a great business concept coupled with strong execution can create an investable business model. Steady and diligent investors will invest in this type of business model regardless of the overall financing environment.

One solid VC I spoke to said two things are happening — people are finally accepting that unicorns (defined by Wikipedia as relatively new companies valued at $1 billion or more) are past their prime, and that many investments in high-end adtech and e-commerce aren’t paying off.

Have you ever thought that a well-funded company that hands out snack packs or silly bow ties to its employees every month won't actually set the world on fire? You'd probably be right.

Should you panic? No, but you better start fighting. I'm doubling down on Freemit's current fundraising efforts in San Francisco for the simple reason that we're looking for a solid partner with deep experience in the investment space.

We are looking for a solid partner, not just a check.

If you think of San Francisco venture capitalists as ATMs driving Teslas everywhere, you're completely wrong. Some of them used to create amazing products at Google, and now they want to try to help other people realize their product dreams.

Others, young and inexperienced, but with a mark of enthusiasm on their foreheads. Still others, accustomed to the ups and downs, paced the deck with a cigar in their mouths, letting the waves crash against the bow.

Take a deep breath, and do as Brad Feld advises: “I read the newspaper this morning and saw a lot of headlines talking about how the sky is falling, Silicon Valley is in chaos, funding is drying up everywhere, and the end of unicorns is coming.

How about a little comfort from Om Malik? "There are many reasons for the current gloom, but one thing is clear: everyone from Goldman Sachs to your Uber driver is speculating. Is this a seasonal downturn or will the turmoil last another year? Investors who were busy complaining about unicorns six months ago are now at a loss."

Again, listen to Alex Iskold: “It looks like seed capital will become less available and more difficult to raise from angels and venture capitalists. But that may not be the case.”

Because the market is calmer, there will be fewer founders trying to start a business. People who are currently thinking about starting a business like Tinder or Uber will now think twice before jumping in. In most cases, they will give up the idea of ​​starting a business.

There’s less noise, which is great for entrepreneurs with domain expertise who will start winning customers and revenue from day one.

If you have something substantial, angel investors and VCs might pay more attention to you, which can be a very, very good thing.”

These few people have been at the forefront of some amazing technologies, and they know that what really matters is to keep moving forward.

If we forget this, then we forget the reason we get up in the morning in the first place. So let’s relax and adjust to a completely different fundraising environment.

That said, there are a few other things you can do to optimize your experience.

The first rule of Bitcoin is don’t talk about Bitcoin

Brothers and sisters, this is the era of blockchain!

If you tell people that Bitcoin is a panacea, they’ll give you a weird look, like you’ve been possessed by Satoshi Nakamoto. But don’t let them sway you.

People who don’t understand this field want to invest in “blockchain”, while people who really understand this field have to report business ideas based on blockchain to their superiors for decision-making.

Why make it so difficult? I don’t care if you’ve got your entire business idea written out as a plan, use blockchain and bitcoin interchangeably and you’ll easily make a comfortable living.

Following the Financial Technology Investors

Find them, nourish them, love them.

Markets have long been obsessed with simple problems. Uber arguably became the last hard problem Silicon Valley had to solve because it was just a logistics problem.

Now that everyone and their dog understands how to get a box of groceries from a warehouse to your van, there is no innovation left. Financial technology, however, is advancing at a rapid pace.

Blockchain technology and Bitcoin are the driving force behind this development, and you need a partner who really understands what you are doing.

Go east, young lady.

Go to New York and London.

New York and London are the financial capitals, while San Francisco is the technology capital. There are not many active investors in San Francisco. If you have a good cooperation plan, you can find unexpected smart investors on Wall Street and in Europe.

Let go of all your obsessions, now is the time to work with the bankers, not against them.

Less talk, more action

One of the most frustrating things entrepreneurs face is asking for traction.

If you are transporting dream chasers from Vancouver, towing is not difficult, but if you want to create a blockchain-based ship navigation contract management service for large ships, it is difficult.

It's a chicken-and-egg problem: you can't get venture capital investment until you have a certain number of customers, but you can't get customers without venture capital investment.

But if you get one unpaid client and a dozen letters of intent from someone else, what do you do next? What do you do if you've built a huge backlist? What do you do if you're in a bank incubator and have a recommendation from Wall Street?

If you can't get traction, you can still use something similar to what it is to support your future. Build something that works first, then build on it and make it better.

We found a great cartoon that we reference a lot within Freemit.

Build something that really works at each stage. Don’t plan big, build big parts. Plan big, build small parts. Achieve more results based on what you already have.

If there is one thing that is striking about the blockchain space, it is that it is filled with bold genius. But don’t let overheated visions obscure the reality of high development costs and user experience.

Bonus Tip: Hire a Designer

I've seen many of the best companies in their industries get thwarted by short-sighted investors who didn't learn from the past. I've learned that looks don't matter... until they disrupt.

Once you are in front of investors, you need to genuinely wow them with your skills. But if your slides look like something my 6-year-old (who is also very talented) did, you are not going to get a foot in the door with these investors. Hire or befriend a designer. This is very important.

Bitcoin and blockchain will ultimately win.

We are living in an era that some old hackers will be very familiar with: it mirrors the rise of the Internet. The Bitcoin space is full of acrimony; fear, uncertainty and doubt; poaching and stupid feuds. Big companies are getting involved in the blockchain space only to create their own private blockchains.

This would have all worked just fine, except for the fact that they tried in the mid-1990s to build private networks that weren’t connected to the Internet.

Back then, they didn’t want their employees to go online and watch cat videos, thereby ignoring the best engine of innovation in the 20th and 21st centuries, just as they don’t want the evil Bitcoin to pollute their traditional, tried-and-true systems for moving money (including but not limited to ACH, SWIFT, and money tied to carrier pigeons and sent across borders).

Keep your chin up, my friend. To paraphrase a clown: "Just wait and see."