Byzant is a series by Neo News Today, providing access to insider perspectives from knowledgeable individuals in the Neo ecosystem and broader blockchain industry. For the following week after a guest has shared their insight, they will be encouraged to participate in discussion on the Neo subreddit by answering relevant questions from the community.
In this week’s feature, we talked to Mark Jeffrey about what it takes to succeed when running a blockchain startup, and how it differs from a traditional startup environment.
Mark is a serial entrepreneur and author with Harper Collins. Most recently, Mark founded the Guardian Circle community emergency response network. He is an early pioneer of blockchain technology, having published BITCOIN EXPLAINED SIMPLY (2013) and THE CASE FOR BITCOIN (2015) and was featured in Alex Winter’s film TRUST MACHINE (2019).
His previous companies include The Palace (backed by SoftBank, Intel and Time Warner; sold to Communities.com with 10 million users), ZeroDegrees (a business social network sold to InterActiveCorp in 2004 with 1 million users) and ThisWeekIn (co-founded with comedian Kevin Pollak). He was the founding CTO of Mahalo (a top 100 website at the time) / Inside.com (backed by Elon Musk, Sequoia and others). Mark also worked with Travis Kalanick (CEO & Founder: UBER) on his second company Red Swoosh.
Readers interested in asking further questions about building a blockchain startup can join the conversation and talk to with Mark in the following thread:
NNT: From your perspective as a veteran entrepreneur, what is the secret to success when running a startup, and how have things changed following the rise of blockchain and cryptocurrencies?
Mark Jeffrey: Starting a startup is easy. Finishing a startup is hard.
In the era of crypto and COVID-19, you can have a distributed team anywhere on earth. Especially now, more than ever, you don’t need to be in Silicon Valley.
It used to be that you needed venture capital money. Now, you can create a token like YFi, and if you’re able to amass believers, that token will be imbued with real dollar value — and that revenue can fund your operations.
I’ve been doing startups in one form or another since the late 90’s. I’ve raised money from Softbank, Ron Conway and Intel. I was the founding CTO of a startup backed by Elon Musk and Sequoia. I worked in a tiny six-person office with Travis Kalanick on his second startup Red Swoosh. And most recently, I did a token sale for $GUARD, a NEO-based token that powers the Guardian Circle ‘friends & family 911 network’ app.
Venture capitalists and angel investors play a game where they invest in ten startups and one of them must become a Facebook or Google or Uber for them to win. Why? Because they expect 90% of these companies to fail. So they are swinging for the fences every time. Sure, they lose nine of ten times — but if that tenth time becomes worth 100x or 1000x, then they make it all back and then some.
But this puts them at odds with you. They must find the next Google, or their fund fails. So they are terrified that one of their ten picks is not the next Google. Their interests are not necessarily aligned with yours. A $100M exit is not interesting to them. They would much rather you see you die trying to reach $1B+ than to sell at $100M.
They will also want control of your company. Board seats. Liquidation preferences. “It is in the nature of the VC to kill the founding CEO. It just is,” Travis once said. It’s true.
This is why I love the new crypto ecosystem that has arisen. It doesn’t have the conflicts inherent to the venture world. I participated in the original Ethereum token sale, and most recently, in the YFi mint rush. Both projects had very strong founders and vision — I knew I was betting on people, not just tech. And I knew that our interests would always be 100% aligned.
I also love that anyone, regardless of Accreditation status or geography, can participate in crypto seed launches. Venture world is very clubby: in addition to ‘Accredited Privilege’, you need access to dealflow. But in crypto, all are welcome.
Which brings me back to the hard part: finishing.
I once asked Mike Moritz what the difference was between the companies that became great and the ones that failed. “That’s easy,” he said. “The ones that win focus on one thing and one thing only — they become the best in the world at that one thing. The ones that wander, that don’t focus, that become seduced by splitting their focus to the siren song of short-term gains — they lose. I can’t tell you what the sure recipe for success is, but I can tell you that the sure recipe for failure is lack of singular focus.”
The companies that are pivoting constantly, splitting efforts between two or more market segments, telling their venture capitalists that they are attacking ‘both opportunities’ … this is where the extreme danger lies.
The word ‘both’ is death. You have to choose.
This is true with a crypto startup. YFi focused on yield farming optimization. That’s it. They are the best in the world at that right now. “Deposit your crypto with us: we’ll make you the most money.”
So Moritz gave us the recipe for certain failure. What about success?
Idealab’s Bill Gross once did a study of the hundreds of companies his firm backed over a twenty year period in an attempt to answer this question.
What was the magic? Was it the strength of idea? The amount of money raised? Marketing?
The answer was surprising — and very statistically clear: Timing.
The number one factor in whether a company succeeded or failed was whether it hit the market at the right moment — not too early, not too late.
That is a humbling thing. Nobody can predict timing. It’s not in your control. So how can you ensure that your project is a big winner?
Well. You can’t. But you can control the factors that make it more likely.
One of those is simply not dying. If your company lives long enough, the timing may go from working against you to working for you. But you have to be focused single-mindedly on your ‘one thing’ when it does.
Travis Kalanick spent eight long years working on Red Swoosh. When he sold it, everyone had quit but him. He had no customers, no real product, no real revenue — and there was only one potential acquirer at the table. But he did have a patent, and he was able to sell the company on that alone. However, he still needed an outside force, i.e. the acquirer needing his patent, to align in order to provide the opening for him to succeed.
The idea of ‘timing’ may make it seem like “it’s all luck” — but that’s not exactly right. You have to be trying when the timing becomes right. If Travis had given up in Year Six, there would have been no Red Swoosh sale — and quite probably no Uber after that.
You can’t control the timing, but you can control the trying.
In crypto, there were many people working on projects pre-2017 that nobody much cared about. Then suddenly, these same people found themselves red-hot and able to sell tokens during the ICO phase. Nobody could have predicted that. Timing.
Likewise, in July 2020, we entered a DeFi bull market. Projects like Chainlink that had been around for years without much attention were suddenly extremely hot. $LINK shot up to be the #6 coin. Timing, once again.
There’s more opportunity in crypto than I’ve ever seen in my life. It feels bigger than the Internet itself. And we’re still in the very, very early days, though it probably doesn’t seem that way to anyone reading this article.
When CoinMarketCap is down, and your project feels like it’s not working, remember to stay focused, and stay alive. If you do this, you have a shot.
Anyone can start a project — but only a Travis, and people like him, have the tenacity to dig in, not die, and finish. That is how you win.
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