How to Grow a Great Crypto Startup

Transcript

All right. Well, it is my great pleasure uh to be speaking at my first Ethereum conference in a number of years. Uh and excited to see so many fantastic folks in the audience. Uh the first thing so I'm Mike Dudis. Uh I am currently a venture capitalist. Uh so I invest in startups across the Ethereum, Salana, and many other crypto ecosystems. If I was a world-class founder myself, I probably would not be a venture capitalist. So, take everything that I say here with a little bit of a grain of salt. Uh, but I have learned uh I'm in my 40s. I've learned over the past few decades quite a bit from succeeding decently in building companies, having

some failures, and working with incredible founders who have done far better things than I have. So today's conversation is going to be about how to grow a great crypto startup. Uh and the reason is I have you know been to a bunch of conferences myself as somebody who is building companies as somebody who's investing and a lot of it is theoretical and it's incredible. Uh, but I feel like we need more practical advice about what it takes to actually grow a company because crypto startups are not only in many cases companies and protocols, but then also have more complexity even beyond that. So, they're actually harder to grow in my estimation than traditional startups. Now the counter that or I'm sorry the the

benefit is if you do succeed the rewards to building a crypto startup are often come faster and are just incredible relative to traditional startups. So how to grow a great crypto startup getting started. So bottom line it's everything in this basically everything in startups and and particularly I think in crypto is about people uh and you know we see that right the people we associate with the people who identify with us uh the people who have sort of shared mission and interest with us but also the people who have a DNA uh that is necessary to excel in a world where you know for example much of

what many of you are building is open source or software. It's very easy in many cases to replicate. It's out there for anybody to see. And the amount of sort of ferocity, drive, sort of animal instinct that you need to have is different than in, you know, hey guy who's selling SAS, you know, gal who's selling SAS, ad tech, you name it. Uh it it's just a different it's both hard tech um but also something that's out there that is replicable, forkable, uh instantly. Um, so you're looking for animals. You're looking for people with resilience. And it's resilience in terms of the technology is going to fail. Um, but also the price might fail. Uh, if you issue token, the uh, reception to

what you're doing might not meet the market the right way. Uh, frankly, the market might fail like right when you're creating something awesome. So, you have to be extremely resilient. Uh and I really do deeply believe in having more than one founder in any sort of crypto protocol or company. Uh I've done it as just a solo founder and I burnt out. I I started the block. It's not a technical company, you know, research media business, but you know, I burnt out uh within a couple years not having a co-founder. Uh it's just such a fastmoving um you know, sort of vicious and intense environment. You need folks around you. uh you want people who are curious. Uh and so I think

so I spend a lot of time on Twitter and I also don't spend it always in the most constructive way and I'm the first to admit it. Uh but in private many of the people I interact with who might be biting or pathy or this or that on Twitter are actually really curious uh in private the conversations they're having. They're actually default optimistic. Uh look for people who you know when you ask a question they're not like that's dumb that's sill like ste like what are you doing like they're they're kind of curious like you are um that's it's just an absolute key characteristic of who you want to invest in and who you want to work with and um they have to care about crypto. I mean

it's just it's you can't fake it. Um, I've invested in so many companies that, you know, we invested in 2022 and 2023, they pivoted into AI, SAS, you know, you name it. Um, and it was just crystal clear that these folks were not passionate about crypto. So, that's something that you're absolutely looking for. Uh, and I think the the scope creep that we're getting right now is a lot of folks who say, you know, they're interested in crypto, but to solve this problem. So, it's like the stable coin thing. Hey, I like fintech and if stable coins are going to solve everything. Um, it could be AI/crypto and like decentralization is going to allow me to launch a token. Just when if you're on those new edge things, just make sure

that person like have them really explain to you what's important about um, you know, distributed consensus, what's important about, you know, distributed training, you name it. Uh, willing to say I don't know. Like dude, I am the dumbest guy in the room probably here and or you know bottom 10 percent. Um in any specific expert field and I'm willing to say I don't know a lot and that's how I learn a tremendous amount. I say a lot of dumb things and learn from those by people correcting. You're looking for people like that as you're building your crypto team and uh and then you're going to spend a lot of time with these folks. It doesn't matter if it's a telegram group, if it's uh you know your slack group, if it's your

office, uh you are going to spend so much time. The best teams that I work with as an investor um more so than anything else because again it's so tribal like 90% of people default think that the thing that you're working on just because of the category you're in isn't going to work. I mean that's intense. So you want to spend time with you want to be with people that you can spend time with, enjoy, trust in the foxhole when you know the barbs come. All right. So you got a team, right? That was the last thing. Make something customers want. Um so I think the idea is less important than the space. Uh like here's where I'll use it. So like you know I've gotten 50 pitches for the next

hyperlquid over the last 50 days, right? And that's a slight exaggeration but there is something there to you know people want to trade assets in new ways with uh you know tighter spreads you know better liquidity instantaneous different assets globally permissionless you know not subject to the rules of centralized exchanges where maybe I can't withdraw like there's something there so it's okay if you have an idea in that general space uh and then you know basically you want to sort of zone in around those ideas um in crypto through history the ideas around sort of fame social you know gaming memes persona NFTTS like creativity or fortune

like hey we're just we're trading we're speculatingly those are things that have worked um new things may work in the future they look a little bit less like pure crypto again stable coins and RWAs but you targeting fame and fortune. you those are those are good areas to sort of start with and then think where is there opportunity in those broad spaces and then keep it simple and this has always been my thing like if I can't if you pitch and I can't explain it back to myself I'm not an engineer and if I spend 10 minutes and I'm still struggling and by the way this happens a tremendous amount um I'm definitely not the smartest guy in the room but I should be able to understand what you're saying after I review it for you know 30 seconds to 60 seconds and just have a

general sense and often I don't Um, you're never going to know. Next thing, ship, iterate, repeat. You're not going to know if like people want your product. We've backed too many teams that take a year to get the perfect product out. And you're never going to get the perfect product down. By the time you do, it's going to be on Hyperlquid instead of Salana. Like memecoins moved, you know, I'm like, that's just one example. But the point is, you have to get something out there. You have to get people believing that you can ship something that they want to use. And if you don't, they're not going to follow you if things change. Um, great teams that have done this are like Magic Eat and Tens or um, you know, that we've invested in the Salon ecosystem that sort of move around, change what they're doing. Um, but the products out

there and people follow them. Uh, and you don't need to be first. I mean, that's crystal clear. There's like a zillion examples. In fact, sometimes it's a negative to be first. uh or if you're first, it takes a lot longer to sort of figure out, hey, what is the path to scaling, which Ethereum is now figuring out in a wonderful way, and that's why I'm at this conference and very excited about it. Um, be yourself. What do these folks have in common? They're themselves. like literally nothing as uh I mean they they do have some commonalities but um these are extremely different people who are extremely successful and what I would argue is a relatively tight ecosystem.

Um you have to be authentic people will sniff out like I promise you I am passionate right now. Like if I could stay up here for an hour answering your questions I would. I care about this stuff. There's authenticity. I'm like you know flowing. Um, so th that's what you're looking for and genu you you h like you don't have to project it because not everybody has that level of outward nature. Um, but you have to be your authentic self. Find that, be it, don't be afraid of it. And then be able to tell the story. All right. So once you've launched, you know, once you have your idea, sorry, once you have your idea, the team you've launched, ride the wave. And dude, it is, we all know this, like waves. And I mean like crashing waves. Like you feel like it's glory and

then like there's rocks. All right, so we're riding the wave. Where should the headquarter be? Um, so this is so I first gave a similar presentation about six months ago, and I think this mattered more uh than it does today. I would say that uh you really need to look at are you going to be regulated? are you not going to be regulated? Uh, and I, you know, of course that's a spectrum just like decentralization is. Um, but you kind of know like, hey, we're going heavily regulated, we're not. And, and you sort of choose onshore, offshore based on that. And I think once you've chosen offshore, you just have to be in a place where you

feel like you can find talent talent. It could be islands, it could be Malta, it could be Dubai, it could be, you know, any number of places in Southeast Asia, could be you name it. Right? The interesting thing is though, you have to be nimble once you've chosen. Okay? Uh we've seen how the Singapore regulatory regime has changed pretty dramatically in the last what 10 days, like two weeks. Um and it's so so the point is uh I would say it's really important make sure though I I would say the number one thing what I've put here where should that be it's talent and then make sure that they're willing to move with you and go with you and be a little nomadic if uh the regulatory environment changes which chain uh well honestly these days I would say that

choosing the right chain means choosing a chain that's not a zero. Okay, I would say and I'm not going to name any of them, but there's probably, you know, 8 to 10 L2, L3, L1's that you can launch in where they are sufficiently, um, you know, they have sufficient liquidity, they have s sufficient user base, um, community where your app can be successful, and I'm speaking sort of apps right now. Uh if you choose one that's not on that list, I mean you're you're making a poor choice and like you probably are going to go out of business. But if you choose one of the ones that's sufficient, uh you can and and by the way, I can privately tell you what that list is uh in my mind and you'll get lots of opinions. Just don't choose a chain that's going to send you

to zero. And people do that and it makes me sad. Should I launch now? ways. Uh you are going to run out of money if you don't start to get to any sort of metrics in a 12 to 18month uh time period or you might just miss a cycle. Please please if you're close launch even launch with a small group of folks start testing the product. Should you go global of course like what is your one advantage like among many it's you could touch anybody anywhere uh for very low cost. All right crypto teams your network is your net worth. I mean that's lame but it's true. So just you should spend a tremendous amount of time creating a network and a lot of that again comes from your authenticity, your

personality and finding like-minded people. Um once you found them really really lean into your community. Okay. Um some people including me I think at times do it too passionately like you should always be looking to expand the folks uh that you want to be associated with. um hire for talent. You like really great interested engineers who have a curiosity are um are what you're looking for and uh if they care those it's much easier to train them than somebody who's like really high paid, really talented, great resume but disinterested and I am like deeply deeply of the belief some people disagree but that you should be hiring full-time people wherever possible and not consultants. do think if you can

find folks willing to do, you know, four, six, eight week trials, awesome. More power to you to figure out if they're the right people, but like like you need people who are like bleeding for what you're building. Um, and then, you know, building everyone's the CEO of the role. Like we don't I like I don't have time to manage. Like I don't think anybody here has time to manage. We're not talking about linear careers. Like we are literally working in frontier tech where there is not an expert in virtually anything that any of us are doing. And the people who are experts literally are going to change their mind in six to 12 months. Okay. So let's just get out there. Let's be the CEO. Let's solve the problem. We might not solve it perfectly and we're going to learn and like form new knowledge in the space.

Learn, adapt, fail and then reward those people. So uh one thing I do see is this like so on a macro level like hey if you take value out you're extractive this that and the other thing we need to normalize rewarding the really really 10x exceptional uh people in the space and I'm going to do my best uh and be very loud uh when I see for example my portfolio companies or entities I know are rewarding great people and they're growing. By the way did it get hotter in here? Did they like turn off the AC in the last five minutes? Like, or am I just like really raising my body temperature? I'm not sure, but it's fun either way. All right, crypto sales and marketing market, right? The product is the marketing. I mean, that's pretty straightforward. Like, if uh I put, you

know, 100K into a money market protocol and I'm earning the promised 8% and it actually works and it's better than the 4% I can earn elsewhere, like in six months, I'm happy. um you know if there's security issues if they change you know how long my lock is the staking rules well hey I'm pissed off so you know market through your product first and foremost make your promises follow through on them okay that should happen through every channel that you're a part of use content uh but make that content again authenticity is the biggest thing it shouldn't be chat GBT it shouldn't be you know kaido um person number 1000 like this stuff's getting too obvious, it's too gross. Um,

stay I I would say stay away from that as a core marketing tenant. Uh, it's not going to be a long-term winner for you. Find the authentic people. I mean, again, it's lazy for me as is, but Hyperlid is a canonical example of finding people who are perfectly incentive aligned, making money, using the protocol, and talking voraciously. That being said, obviously price does lead sentiment and support, and Hyperliquid's sort of been up only. a lot easier to market your product when the price is going up. Um, so you know, keep an eye on on what happens if the price goes down on some of these things.

Salana, for example, price of Salana, I mean, it hit 250 in February and, you know, it feels like right now it's kind of having the arc that, you know, Ethereum has had at different times in its life where it's like, well, Salana is doing everything wrong. It's down, you know, 40%. Um, and frankly, all metrics are actually pretty substantially better on the chain than 12 months ago, but sort of price lead sentiment. Um, and so the example on Ethereum, the example on Salana is they're both, you know, Ethereum's done a fantastic job of just like crystallizing the message, using all the channels to now get a little more coherent. And Salana is just like, hey, we're just going to keep doing the um, internet capital markets. Boom, boom, boom, boom, boom. You're the PR agency.

You can't outsource this stuff. Know the business outcome you're driving with any spend. Honestly, I just don't like it's hard for me to imagine spending a lot. Even I like ECC. This is a beautiful venue. I walked through it was still a little bit difficult for me to understand how any of the spend at a conference like this was translating through to something that like stuck and crystallized in my mind. Whereas, if I saw the CEO up here speaking um like a earlier, I'm like, "Wow, that's profound." You know, it's coming from the heart. He means it. Um okay. In terms of sales and marketing, know what you're selling, vitamin or medicine, right? Am I helping you like supercharge? I'm giving you like 3x on your returns, or am I like solving this

problem where like you're about to get hacked? Um, founders have to be in there day in day out. Um, and then one other thing and and I think the last presentation was attempting to get at this, which is like do you have product market fit or points market fit? points market fit lasts for like you know six 12 months. It's it's fun. It's um like crack. It's stimulating. You're looking at it day in day out. These metrics my god and then you have a bear chain and it's like boom the period ends and it goes down like you know what a third or half. Not just the price but like the amount of value in the chain. Don't get hooked on that like candy. you know, you really really want to make sure that you

have uh mechanisms uh that folks are excited about. Okay, cool. I'm going too long. Um, all right. Identify your tribes. You know what's kind of cool? Despite the little silly occasional social media arguments, I do I have sensed this year that we're all mo moving towards like a tribe of, you know, look, there's a bunch of different approaches. is it might be at the L1. It might be uh you know modular. You know I could use all the buzzwords but bottom line is like we're getting people to build things and integrate core financial primitives and non-financial primitives into our blockchains. Like let's just keep doing that. Like I feel

like our tribe is um you know every one of us who's like sort of pilling large companies that have great distribution to get people and by the way this is desperately necessary because we haven't grown the number of onchain users particularly significantly in the last 18 months in aggregate and it's a problem. So we definitely need to start doing that. Um I'm going to just rush ahead. Landing the plane. All right. We were riding the wave and now we're coming in for a landing. All right. I've got one minute. Um, okay. So, two big things. I'll just summarize these. So, smooth it out. Startups are chaos, complete and utter chaos. And they're particularly chaos in crypto where you have cycles where you have immediate like at the earliest stages, price

signals. Uh, your job as a leadership team, your job as a CFO and hiring is trying to smooth out that uncertainty day in and day out. like it's um so you're basically smoothing out emotion and trying to so an example would be don't keep like to the greatest degree possible I've heard people who say like you should be chain aligned and hold like your treasury in ETH or soul no like please I pray for you pump fun is our largest portfolio company they sell a lot of their soul into USDC you need to make sure that you're going to exist a few years down the road smooth things out to the greatest possible so you can

deal with all the other uncertainties that come along with a crypto startup. And Pump's a good example. Find the one killer app. Obviously, theirs is like I can launch a token for basically no money in a second. Uh OpenC did this like you know list NFTts and launch NFTts like Poly Market did it. Uh Hyperlquid did it. If you can find that one killer app, you can amass such a treasury in such a short period of time. Jupiter did it such that it gives you then the treasury and the flexibility to take time to either acquire, build, buy all of these things, build organizations, governance mechanisms to become a sustaining long-term entity in crypto which is really really uh difficult. Um I'm not going to get to

that one. I'm think we're out of time, right? Okay. Hey uh to you know what? I'll share the slides later. Thanks all for listening. [Applause] one or two questions. Ah yes. Yeah. So, I'll do this one real quick. Okay. So, um, so right now we have a massive thing that's happening, a massive shift between token and equity.

Equity does have value, guys. Equity does have value, guys. We're valuing it as venture capitalists. We've invested directly into equity. Um, we've seen now privy exit to Stripe. We've seen bridge exit to Stripe. We're within our portfolio. We have four companies in equity exits at the moment at sixman ventures. Uh there are large acquirers who are valuing equity. So, please think about and what that means this revenue meta. The way that equity is valued is typically is this a profitable company?

What does the ARR look like and what is the upside? Um so please and I think what equity having value means is that it kind of decreases the pressure on launching a token prematurely. And I think many um projects and protocols have launched tokens too soon, too early and it's harmed them. I think the fact that you can think in the back of your head that equity has value might give you a little more breathing room on the uh on when you might want to launch a token and being a little more patient before you do it. Oh yeah, one tip. One tip I would say

genuinely it's um so know that you're constant so you're constantly doing two things. your three things, shipping, selling, and recruiting. Like if you're you should be spending all your time doing that in the first like year of being a founder. A third of the time hiring, third, you know, third of the time shipping and third of the time selling. I mean, it varies, but something like that. Those three things. [Applause]