Dragonfly Capital's internal letter: The top priority is survival

Here’s a letter we sent to our portfolio company founders and partners this morning. We thought it might be useful for a wider audience, so we’ve posted it here to share it with you as well.

I want you to stay safe and sane in the face of market turmoil. You and your friends and family may already be in close contact with the crypto market, and I want you to put your happiness and health above all else.

Overall, the macro situation for both crypto and growth assets is deteriorating. We know you’re a long-term investor just like us, but you have to assess the current state of the market. In a market like this, the imperative is to survive, and make sure you and your team can survive until the market is ready for what you’re building. Every bear market brings difficulties and challenges, but those who can weather the storm will reap the fruits of the next boom and create teams and products that will endure.

If you’re looking to expand, stop and retain the talent you need to get through this downturn. If you’ve expanded recently, now is the time to focus on what’s important and cut expenses, and if you’ve overhired, whether it’s in product direction or people, focus your resources on key talent and products and let go of the rest. “Focus” is the name of the game. The history of technology is full of teams that come up with the right ideas at the wrong time and fail to see their vision come to fruition. I don’t want to see that happen to any of you.

I don’t say this to be alarmist – you shouldn’t be scared at this point, but face it seriously and calmly. The industry as a whole has just changed, and you should recalibrate your assessment of the current situation. Don’t rely on old assumptions. We can see a huge change in the way Crypto works.

Here’s what we expected to happen:

Capital markets will slow down. At a time when investors are starting to digest new price levels, many deals won’t be made.

There will be a large influx of talent into the market in the next 3 months. Bargaining power between employees and businesses will normalize.

There will be strong calls for regulation. Supervision will become stricter and stricter, and more and more innovative products will go overseas.

During this time, the market will be less speculative, especially if retail investors are no longer trading large funds. Many narratives will be reset, and the old narratives will no longer be.

Each of you needs to absorb this in a different way. Your team needs to see the confidence and direction you’re conveying. Knowing you’re okay, they’ll be okay too.

If you need help or just want to talk, we’re here to help you get better or worse. We work with you because we believe in the industry and because we believe in you and look forward to continuing to be your partner for years to come.

• Tom, Haseeb, and Dragonfly team