Cryptocurrency

Crypto ‘Winter’ And Its Toll on the Startups

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In a recent survey, sixty-six crypto-based startups reported that despite the shocking downturns in the crypto market recently, a majority of the surveyed startups said that they were able to steer clear of any kind of setbacks, or any change in their ‘product roadmap’; as per CoinDesk. In the survey forty-five startups replied and out of those forty gave a positive response and showed hope in the coming year. There was also the presence of admonitions about any future hiring or raising of the funds. There was a love-hate relationship sentiment about the crypto industry in the responses yet at the same time, many admitted that the industry is in its infancy. The Co-Founder of Boost VC- Brayton Williams said-

“The investment money is returning back to the norm of difficult to obtain. I think the ‘winter’ is greatly exaggerated. WE are just back to normal behaviours.”

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In the year 2014, Boost VC’s target was to invest in 100 crypto companies. The company managed to attain its goal in 2018.

The survey revealed management strategies :

In the survey, many other strategies were discussed in order to be the ‘dark horse’ in the crypto industry. One such technique surfaced in the survey by CoinDesk. The technique suggests not to invest in the Initial Coin Offerings (ICO.) This will safeguard the exposure of the company’s payroll and rent money against the turbulence of the market, and thus the company can smoothly build the crypto foundations. An advantage of following the traditional way of fundraising is that it generates funds in the fiat currency.

Another revelation from Doug Petkanics of ‘Livepeer’ talked about how the company managed to stay strong in the volatile crypto market. The company’s secret was in keeping the majority of the capital in fiat currency, which saved them from the crypto turbulence. As per the reports from the CoinDesk, Doug Petkanics shared the following in an email-

“The market drop affects the general ecosystem and sentiment around the space that we are working within. Projects do not get a free ride in terms of blockchain tech being seen as cool or disruptive amongst the general public.”

On the other hand, despite going against the advice of not investing in the Initial Coin Offerings (ICO) the survey saw that there were startups who managed to survive even after investing in the ICOs. For instance, the Founder of Altonomy (a trading firm and advisory)- Ricky Li said-

“A lot of people listened […] Those that did not care about the currency market. Those that did not, well, not so much.”

He suggested to his clients who were investing in the ICO to maintain the liquidity of ETH in order to maintain long term performance. He further advised his clients to use various crypto-based indices to move a large amount of ETH. This will help them bifurcate the exposure. This made some of the clients to purchase options on their holdings.

Another insight came from the startup called ‘Keep’ (a project from ‘Fold.’)  It supports the storing of private data on the Blockchain ledger. The company decided to go beyond the code and create its very own applications. The app was designed with an aim to propel the adoption. The Project Lead of Keep, Matt Luongo said-

“We were expecting an extended downturn as we were around for the last bear market.”

On the other hand, Polymath’s Trevor Koverko shared his thoughts with CoinDesk on how Polymath backed up with an impressive ‘treasury management plan’ gained good results. He said that the company’s technical roadmap has got expedited. He and his company rather look at the ‘bear market’ as a ‘blessing’, as it leads the company to focus more and come with strong developmental projects.

The survey sprung several interesting takes on the growth in the crypto industry for startups. One such idea is to make sure that the core values of the company never gets compromised. The Chief Strategy Officer of CoinShares- Meltem Demirors is expecting that the ‘market forces’ will rush to save the best-performing companies. In an email, she wrote that she is hoping that more and more companies will join and double up the mutual power. She hopes that specially in the scenarios where two companies are aiming at the same wallet share. This will give rise to better user experience and therefore, will make such projects overall a big success. She further suggested that for those companies that prove their worth, there should be additional funding. In the current scenario, as per Demirors the companies who showcase a ‘reasonable business model, some proven traction, and a reasonable valuation’ should get additional support for further growth.

Stronger bargaining positions for the employers :

Along with Koverko and many other founders revealed that the bear market tendency has made the bargaining position of the employers stronger. As per BUIDL, currently, there is a strong ‘buy’ rating. From Origin Protocol Josh Fraser wrote an email to CoinDesk and shared the following views-

“We view this as a great time to pick up talent and build great technology, much like Google and Amazon got their head start during a bear market.

In contrast to Fraser’s thoughts, the CEO of ‘Compound Finance’-Robert Leshner had a different take on it. As per him the there is ‘default scepticism’ for the blockchain industry in the candidates. He further told that as per him this is key as he hopes his core early customer base to be the crypto funds. And several of those customers are closing down.

Time to cut down expenses :

Several companies who participated in the CoinDesk survey said that it is time to cut back on the outward-looking expenses such as events, promotional activities, public relations costs and so on. Marco Peereboom of Company 0 said in an email-

“We feel that it is a waste of time and money to travel all over the place while the audiences are small and dwindling.”

The idea of focusing on internal activities was shared by other companies like Nebulas, ShapeShift and so on.

The sailors :

There have been some companies that survived the turbulence and as per CoinDesk- ‘have gone long on ETH and managed to keep going.’ The founder of Konstantin Boyko Romanovsky said in an email to CoinDesk-

“Despite that, we managed to provide all the key deliverables in accordance with the project’s roadmap and declared timeline. All points were executed.”

Flixxo as per CoinDesk’s survey has most of its funds in ETH, making the dip in the crypto market or the bear market tendency quite challenging for the company. The founder of the company Adrián Garelik said that his company thinks-

“We feel there is a time-sensitive opportunity and we would rather spend all our resources and take the opportunity than waiting for a better moment for crypto. It is a bet, but we have a lot of confidence in our vision.”

The comparison between bear markets contractions :

Another interesting factor that came out of the survey was the comparison between bear markets contractions. For instance, Peereboom expressed the following thoughts on this comparison-

“It does not quite feel like 2014 because ICOs raised so much money, but space is not done consolidating.”

On the other hand, Harmony COO Nicolas Burtey said that his company really needs to have tokens in order to build the community, yet any mention of the high sell pressure might bring about a negative effect on the project.

Mining company- Random Crypto’s head Josh Metnick expressed his views in an email to CoinDesk. He said that as per him the best time for mining is when there is a stagnation of the difficulty. And the rates on the ‘gear are reasonable.’

According to CoinDesk, the co-founder of Boost VC maintained his stance and clarity on the crypto industry when he wrote that

“This ‘winter’ is 100X better than the 2014/15. People do not think crypto is going to die. They are all just trying to time for when it comes back. In 2014/15, the conversation was all about if crypto survives at all.”

Trevor Holman

Trevor Holman follows crypto industry since 2011. He joined CryptoNewsZ as a news writer and he provides technical analysis pieces and current market data. He is also an avid trader. In his free time, he loves to explore unexplored places.

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