In a bear market, 10 pieces of advice from Sequoia partners for crypto founders

This article is based on the views of Michelle Baile, a partner at Sequoia Capital, on her personal social media platform, and BlockBeats translated it as follows:

If you’re looking at a falling market across the board right now and are at a loss, here are some experiences and ideas from Sequoia’s 50 years that apply equally to the crypto market.

First of all, we have to embrace the reality that the crypto market is now facing an unprecedented situation, and while crypto has gone through several bear markets, it has never experienced a global macro-financial storm. Bitcoin was born in 2008 during the last global financial crisis. Cryptocurrencies have been in an environment where interest rates in the U.S. are around 0%.

Over the past 14 years, crypto has grown exponentially. The level of sophistication or diversity of today’s market participants (individuals and institutions) is unmatched just a few years ago. We’ve never received so much attention from users, developers, and regulators.

So here’s the thing: we’re in an unprecedented situation. This bear market will be similar to the past, but many important aspects have changed.

Maybe you’re a founder, and the project Token has fallen by 80% in the past year. Or you haven’t had time to clear your inventory yet, and you still have tokens for several different track projects in your wallet. Or you want to know what might happen to your customer base. Excessive pessimism and complaining is pointless, but self-deception is not enough. **In a bear market, what should I do?

1: Don’t panic, but plan ahead. This is the moment of the diamond hand, not only for your personal portfolio, but also for your company, protocol or team. This month you need to be thoughtful and act decisively. Stick to it and be cautious at the same time.

2: Recognize that the financing environment has changed. VC funding is no longer something that can be obtained casually. Correspondingly, you need to keep your project expenses under control.

3: Talk to people who have actually crossed bulls and bears, their experiences are invaluable. Most VCs in the crypto space have not experienced today’s environment. Ignore the biased rhetoric of investors who have become neurotic because of their losses.

4: Ask tough and painful questions. First of all, does our product really meet the needs of the market? Many founders are product producers, so it’s a painful question to ask. A wide variety of incentives and incentives can mask product-market fit. **

5: The second question is, do we have a sustainable business?“Token up” is not a business model, the native token used to secure the network is another matter. However, if previously you were only thinking about raising money through VC and Token, then you should think about it.

This doesn’t mean that your product should start charging, especially if it’s a project that has a network effect, or occupies a premium track, it’s time to take a look at your track and make a plan. Crypto or Web3 could better adjust incentives to reward users and creators, but in no way can deny the existence of objective laws.

6: Invest wisely. **There is almost always 10-20% of sales and marketing (S&M) and general and administrative (G&A) expenses that can be cut. This will make your team more efficient. Most crypto teams are lean, but there can still be redundancies, so focus your precious energy on what matters most.

7: Focus on core R&D. This is one of the most important lessons Sequoia has learned from '08 to scale back in other areas, but to go the extra mile on the product so that you can distance yourself from your competitors. When you survive a bear market, you become the strongest one.

8. Hire a good CFO. The CFO (Chief Financial Officer) is probably the least appreciated role in the crypto space. To be honest, I don’t know why. A good CFO won’t sit around and tell you not to spend money, but will help you invest wisely. Find a good CFO as soon as possible.

9. Develop a sustainable development route. You need to find a sustainable business model that doesn’t require VC funding or retail investors investing in your token. It can take more than 2 years to get through a bear market, and if you can only keep it running for 12 months, then you need to cut back on expenses.

10. Seize the opportunity. **Turbulent times will have a chance to appear, and the strong will always be strong. When the underdogs around them collapse, the strong poach their best talent and win over their users, as well as their IPs and licenses.

This is the time to expand your edge and solidify your position as a market leader, but you need to survive to seize it.