0xGregH#01: New Year, New Focus
What 2023 and beyond holds for this newsletter
Hi everyone and welcome back after the Christmas break!
You won’t have heard from me for a while as I have been building out a startup in the crypto space and that took precedence towards the end of last year.
So the first announcement…
Goodbye Altcoin Evolution
In 2023 I have made a commitment to write at least 52 high quality articles.
BUT I am changing the focus of the newsletter. Read on…
I appreciate many of you will have followed me because of my deep dives into various tokens - while I enjoyed the end product of those research tasks they became too burdensome to be consistent.
Hello 0xGregH Newsletter
This year I will be sharing 1 piece of actionable advice each Saturday to help Web3 founders (or people who are thinking about doing a startup) get started, build better businesses and secure funding.
That means we’ll cover everything from finding co-founders to structuring business operations and even generating revenue!
These lessons are from some of the mistakes I have made prior to my current start up as well as documenting what it takes to build a Web3 start up in the current environment.
If that all sounds good let’s jump into this new format below…
Time to get your finances in order
Category: BUIDLbetter
Before the new year gets really underway, this is the perfect time to get your start-up’s finances in order.
This first newsletter will teach you 4 steps to get an initial treasury management process in place.
Web3 startups are typically funded with tokens. It can be daunting to manage these effectively to survive, especially through the bear market.
Unfortunately most DAOs and start-ups lack even basic understanding of what expenses will be coming out in the near term and whether they will need to drastically reduce costs or find fresh funding.
Native tokens still represent 80% of these [DAOs] treasury assets, making the projects highly susceptible to market downdrafts and highly illiquid when it comes to operating budgets ~ Messari 2023 Report
Right now you are probably thinking…
... this sounds complex and boring
This is the number one complaint I hear from founders.
Other excuses for not having good financial plans are:
Reason #1: I’m sure it will be fine our investors will bail us out. Congrats on getting some funding… While it’s true the amount of dry powder in the VC ecosystem is still incredibly high, a lot of LPs are currently squeamish about putting more money into start-ups at this time especially Web3 based ones…
Reason #2: This takes too long, I should be focused on building. One of the more legitimate reason imo. Yes you should focus on building as a founder but what if you can’t get new funding? Will you close up shop? Or do you have enough to run as a side project (pre-VC funding) or keep the lights on to ride out the bear?
Reason #3: Isn’t this what my accountant is for. In short no. You’re accountant is a specialist in history - what happened in the last quarter/year. While this is a good guide to the future it falls to those inside the company to define what the future looks like.
Luckily for us there are some simple things we can do to get a hold on your start-up’s finances that can be achieved in 4 simple steps:
Step 1: Establish clear goals and objectives
Understanding what you want to do this year will help define the cash needs of the business.
For high tech startups this will typically be a question of what is on your product roadmap.
At my own start-up we like to set quarterly and yearly goals, loosely following the SMART framework.
For example this quarter our goals are as follows:
Deliver a data analytics website that compares different NFT projects by January 30th.
Secure £ [hidden for privacy] Mm pre-seed funding from a number of VCs by March 30th.
Hire 2 full time developers by July 31st to build out further functionality.
Setting these goals will help you prioritize your activities and make informed decisions about how to allocate your resources in step 3.
Step 2: Identify risks. Put in place counter measures.
Blockchain startups face a variety of risks, including market volatility, regulatory uncertainty, and cybersecurity threats [this Hackernoon article discussed some issues facing blockchain startups at the beginning of last year in the midst of the bull market].
It's important to identify and mitigate these risks in order to protect your company's assets and maintain investor confidence.
The now infamous Luna/Terra algorithmic stablecoin crash was a risk that was pointed out numerous times on Twitter but largely ignored or dismissed by the team as the bull market ripped.
It was only as the market came down again and cracks began to show that the team tried to take preventative actions to counterbalance the short comings of the model.
Had they been proactive in putting in place better processes to remove the chance of a death spiral the contagion could have been avoided.
Bottom line, seek insurance against things you can. Minimize the impact of things you can't control.
If you are a UK based company a lot of the insurance products dried up following the FTX fallout - feel free to DM me if you need an intro to someone who can help.
Step 3: Implement effective cash management processes.
The previous 2 steps both lead to this point. Yes it may be the hardest one, but it is the last truly proactive one.
A cash management process includes forecasting cash flows, managing cash balances, and optimizing the use of your cash resources.
To work out cash flows you will want to look at;
New costs - are you planning to build out your team more? What costs will you incur delivering your product roadmap?
Ongoing costs - what is your AWS bill currently? Are you in an office space?
Revenue - is there a way to offset costs with new revenue coming into the business? Are you solely dependent on fresh funding?
Asking these questions should give some insight into the current and future needs of the business.
Step 4: Monitor and review your treasury management processes regularly.
This will help you identify any areas for improvement and adapt to changing market conditions.
Here it is often appropriate to use software to support your treasury management activities. This may include specialized software for managing digital assets, as well as tools for monitoring market conditions and executing transactions. Examples include:
In summary…
Overall, the key to effective treasury management for blockchain startups is to be proactive, flexible, and strategic in your approach.
By following these guidelines, you can help ensure the long-term success and stability of your company.
Bonus: 2023 Crypto Outlook
As it is the new year it’s a good opportunity to look forward as well as back.
2023 is sure to be an exciting time for crypto with the usual positive and negative swings in the market (hopefully more of the former 🙏).
There are a few things I am watching:
Continued fallout from last year in particular Binance and DCG (see DCG & Genesis Contagion Risk in Messari’s 2023 report below for more info)
We should hear back from the courts on the SEC vs Ripple case (good likely outcome explainer video)
Announcements of new NFTs from more mega-brands and large companies. I have the beginnings of a brand NFT database in the works which I will share later this year.
Let me know what events you are most excited for below.
Other viewpoints from industry leaders
If anyone wants some light? reading over the next week here are is a list of all the crypto market outlooks for 2023 (credit to Marc Baumann for compiling this list):
Coinbase: https://lnkd.in/eZXa8meu
Messari https://lnkd.in/ecCBypB9
Pantera Capital https://lnkd.in/eFYkcsNQ
Arca Funds https://lnkd.in/eTF6K8ZP
New Order DAO https://lnkd.in/ef_9YqWF
Crypto.com https://lnkd.in/e3Yj7_Qz
Huobi Research https://lnkd.in/e6SbRqSa
Binance https://lnkd.in/eU62aVZV
Delphi Digital https://lnkd.in/eHwjAtr2
DeFi Lama https://lnkd.in/eUZvdK2H
Cointelegraph https://lnkd.in/eFGnb_XG
CoinDesk https://lnkd.in/ec6kHAfy
The Block https://lnkd.in/eSQQHvyd
Bloomberg https://lnkd.in/e-2yYBEF
Forbes https://lnkd.in/ebg7vxeQ
Saxo Bank https://lnkd.in/e_TAY9kg
VanEck https://lnkd.in/eRPeETKV
Accenture https://lnkd.in/esh65Q6F
Personally Messari/The Block are usually the ones I would recommend as they tend to have less technical detail than others.
That’s it for this weeks newsletter. I wish you success and happiness in 2023 and look forward to talking to you more regularly.
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