Web3 entrepreneurship and the mirage of the next bull run

Odyssey
6 min readOct 31, 2023

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Article written by Axel Tombereau — CEO at Odyssey

A web3-specific strategic pitfall.

Most web3 entrepreneurs are obsessed with external market conditions.

As if their business outlook was fully dependent on their serious exposure to the untamable crypto market.

As if the cyclical dimension of the one-decade old crypto market was an absolute truth determining future business outcomes for most industry players. “Show resilience in the current bear market to thrive during the upcoming bull market” seems indeed to be a very popular mantra in the web3 industry these days.

If the bull market doesn’t come back in the next 6 months we go bankrupt. What if comes later? Or worst, what if it does not come back?

Expecting the next Bitcoin halving in 2024 to grow is equivalent to put entrepreneurs’ fate into the hands of market makers. In addition, financial theory taught us for long that such publicly-known events are already priced, at least partly, in all informationally-efficient markets (cf E.Fama). Isolating the halving as a major parameter notwithstanding all other macro-economic conditions that could interfere with crypto prices in the market can also be misleading.

In parallel, awaiting an acceleration in cryptos’ mass adoption and acceptance would basically expose web3 entrepreneurs to the same issues.

Without a radical change in entrepreneurial mindsets, what comes next is nothing more than an unavoidable combination of delusion and massive failures. We certainly all want to avoid this distressed scenario to give the world the opportunity to unleash the far-reaching potential of blockchain-powered innovators in various fields, including notably gaming, DeFi and brand loyalty — among plenty of others.

#1 Uncertainty prevails.

We live in a VUCA+ world. All entrepreneurs need to cope with this. There is no exception for web3. Nobody can predict precisely whether there will be a next bull run, when it will occur, how long it will last, what its drivers are or what its order of magnitude will look like. Period.

As financial markets’ experts have already experienced, what happened in the past gives no clue of what will occur next. Even the Great Gatsby acknowledged that “you can’t repeat the past”. This statement is all the more valid for the still emerging crypto market since it has been confirmed in other financial markets that existed for decades or centuries, whether you like Brownian movements or not.

#2 Die hard entrepreneurs don’t manage their startups based on artificial cash infusion or on speculative assumptions pertaining to macroeconomic conditions.

How insane would it then be to base a company’s strategy almost solely on speculative views of how a market will behave? What if the supreme salvation does not come from a steep bull run? Wishful thinking does not lead entrepreneurs anywhere.

Bowing your back during crypto winter to accelerate when bull market is there is not at all a compelling strategy. It’s not about surviving until things get better. The design and implementation of a startup’s strategy is about making better things happen by taking action within your scope of business, within your reach.

[Of course, entrepreneurs are entitled to work on sophisticated financial models to consider a range of forward-looking scenarios and make action plans accordingly. A common peril nonetheless consists of letting these scenarios preemptively decide your strategy, instead of conversely anchoring it in the real world based on hard facts].

The urge for stronger strategic and business foundations.

Refocusing on building solid business foundations is then a prerequisite to secure the sustainability of web3 startups in the midterm.

A paradigm shift is required to make this refocus entrepreneurs’ primary concern whilst their actual priority seems to be granted to tech foundations’ strengthening.

How could such a paradigm shift be successfully implemented?

Well, applying a set of 3 old recipes that proved effective in many other industries could be a good start.

1. A mindset pivot from technology-centric projects to client-centric startups must be operated.

Technological complexity is a barrier to adoption that is now understood by web3 players. Designing a smoother user experience is already a great milestone on the road to client-centric models. But there’s still a long way to go.

How do web3 startups actually create value over time for their clients? What are their underlying go-to-market and digital marketing strategies to create sales funnel and increase their conversion rates? What are the main customer benefits they actually deliver in the B2B and B2C segments? How do their products or services actually solve customers’ most prominent pain points?

Although these few questions could certainly be a quandary, devising a holistic strategy to hopefully reach product-market fit is what all other startups do. Technological advancements must enable real usages and utility, but also serve your strategic objectives and business sustainability. A community is a relevant metric but not always synonym for a paying user base, don’t forget it.

2. The design and implementation of a sustainable and efficient revenue generation model definitely remains a key success factor that shall not be overlooked.

Cash vaults helped to survive but are not sufficient to sustain business, grow and thrive.

- The time of highly speculative revenue models (if we can say so) based on one-off tokens’ & digital assets’ airdrops is not eventually gone. Surprisingly enough, it seems fair to recognize that airdrops act as an effective mechanism to engage a community and to drive a token’s price up during the bear market. Airdrops and token issuance are a non-neglectable source of cash for web3 startups, enabling them to survive, extend their runway, and sometimes to reach success at a certain degree (Linear, ZkSync, Scroll…).

But this sales and financial tactic alone may not prove sufficient to back web3 business over a pluriannual period of time without a solid revenue model and strategic framework.

- A significant portion of web3 startups survive thanks to cash infusion from Layer1 foundations, who abundantly irrigate the ecosystem as long as they remain deep-pocketed. This virtuous trend is unfortunately not sustainable forever, especially if a bull run scenario is uncertain, and does not always help satellite startups to find their own minimum viable revenue model.

As crypto adoption steadily increases across the B2B and B2C segment, a growing number of attempts to transpose proven revenue models into web3, such as marketplaces or SaaS-like platforms is noticeable.

Let’s first acknowledge these revenue models are not fully consistent with the overarching principles, such as decentralization, that earmarked web3 foundations and philosophy. But they are still better than no revenue generation at all. And decentralization is not always at the core of emerging use cases involving blockchain (authentication on private blockchains).

With a step back and some hindsight, the generation of stable revenue streams inspired from traditional models out of the web3 sphere, for instance from subscriptions or recurring volume-based fees, appears to be a vital necessity to survive and thrive as third-party funding is drying out. It’s a matter of model, pricing, and obtainable market and volumes. The design of a valid revenue model is consubstantial with continuous value creation for customers.

3. Antifragility must be on the roadmap.

Creating a business model that is resilient or better, antifragile, to crypto-markets should be a top priority.

Tomorrow’s winners will be the most antifragile startups that scale up despite macro-economic headwinds. Champions emerge during crises. So, expecting to jump into the bandwagon of the next bull run is not the right strategy. Creating and seizing opportunities during downturns generally offers the best growth leverage. This could be a relevant starting point to further elaborate on your strategy, market position, differentiation and business model. The AAA framework could be helpful. Antifragility lays the foundations, anticipation prepares for the future, and agility bridges short and long-term by creating a viable present.

As a conclusion, a refocus on building solid strategic and business foundations is far from incompatible with building innovative tech and infrastructure. It could offer a powerful match and leverage to web3 entrepreneurs.

A first survival toolkit would rely on a radical mindset shift to trigger a concrete action plan. Establishing stronger foundations may imply to grant a peculiar vigilance to (1) finding the right product-market fit thanks to a client-centric approach, (2) determining a minimum viable revenue model to sustain business as much independent as possible from external funding, and (3) explore strategic opportunities to become antifragile to both cryptocurrencies’ market swings and macro-economic headwinds by creating new revenue generation models.

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Odyssey
Odyssey

Written by Odyssey

Founded in 2020, Odyssey is a trusted advisor specialized in strategy, fundraising, and mergers and acquisitions, with expertise in the field of emerging tech.

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