Techstars Alchemist Blockchain Accelerator — Week 5
I joined Techstars Alchemist Blockchain Accelerator as a Business Associate in New York City. Over 13 weeks, I look forward to working with the inaugural class comprised of 10 inspiring early-stage blockchain startups (Alkemi, AnyLedger.io, Autom(8), Blockade Games, Embleema, Gilded, Paperchain, Paperstreet, Trixta, Veracity Protocol.)
The following provides a high-level overview of Week 5 of the accelerator program as well as a few personal insights. After completing 86 mentor meetings, the companies’ focus for the next month has shifted to gaining TRACTION.
Past recaps on Mentor Madness: Week 1, Week 2, Week 3, Week 4.
TL;DR
- AMA with Steven Nerayoff: laying the groundwork for the future of utility and security tokens;
- Market Sizing Workshop: an overview of TAM / SAM / SOM;
- Growth Hacking Workshop: creative marketing on a limited budget;
- Values Workshop: team building exercise;
- Technical Partner Presentation: 0x;
- Founder Story: Will Warren, Co-Founder & CEO at 0x;
- MasterClass: Fundraising with David Cohen;
- MasterClass: Fundraising with Alex Iskold;
- Legal Workshop with Global Network Partner: Cooley;
- Group R&R in Hudson, New York;
AMA with Steven Nerayoff
We had Steven Nerayoff, the Co-Founder and CEO of Alchemist host an AMA. Steven is credited as the legal architect of the record-setting Ethereum token sale. He answered our questions on the current state and future of tokens.
Key insights:
- Utility Tokens (UTs): UTs are new digital instruments that provide future access to products or services offered by an issuer. UTs are not created to be an investment, but rather an ecosystem asset. UTs should have functionality which is a product in itself (e.g., a discount on usage). UTs applications are still experimental but when designed properly can generate large network effects. UTs should not be a company’s primary form of fundraising. Many existing tokens are designed without taking into account the decentralized environment. The token model will evolve as businesses and ecosystems evolve. The market size for utility tokens will be in the trillions and core to the future of business.
- Security Tokens (STs): a ST is a digital asset that derives its value from an external asset that can be traded. A security token offering (STO) is a financing mechanism, which reduces the barriers to raising capital. Tokens are subject to federal laws that govern securities — unregulated security tokens will get weeded out. Every company will become a public company. The full suite of tools to get there are not built yet — many companies are competing to become the standard. The total addressable market for STOs includes all existing public securities + other illiquid assets (real estate, private securities, etc.)
- Rate of Adoption: the fiat and crypto worlds are slowly converging but at a slow rate. The technology will take longer to adopt but the inflection point will be steeper and deeper. For reference:
- Most interesting event of 2019: scalability of networks without sacrificing decentralization.
- Impact on wealth: blockchain tech is likely to act as a gravitational force between the top 1% and the 99%. In the short term, wealth inequality is likely to get worse. The biggest benefits of decentralization and blockchain technology will be in the developing world.
- Quantum Computing: The risk of quantum computing to IT security is a real threat — it is a question of when not if.
Market Sizing Exercise
This week, I spent some time leading a team through a workshop on market sizing. When doing market analysis, a useful top-down mental framework is to divide the market into:
- TAM (Total Available Market): total market demand for a product/service or the opportunity for disruption;
- SAM (Serviceable Available Market): the segment of the TAM targeted by your products and services which is within your geographical reach;
- SOM (Serviceable Obtainable Market): the portion of SAM that you can capture;
The following shows a high-level example from Etherplan (this is for reference but I question some of the underlying assumptions):
A good market sizing analysis can help with prioritization and provide a road map for growth plateaus. Once a plateau is reached, the company can release the next filter point to generate new growth. This framework is fairly simple and should be complemented with a robust bottom-up analysis grounded in quantitative assumptions. Stay tuned for future updates.
Growth Hacking Workshop
Many companies are currently focused on growing their initial userbase, customer base, and reputation.
Marketers at early-stage startups have to get creative when there is a limited budget. One of the most famous growth hack examples is Airbnb’s Craigslist hack. In its early day, Airbnb realized that potential users were looking for alternative accommodation searched on Craigslist. Airbnb offered an option for hosts to copy their listing to Craiglist with one click, verify the information, and post. This growth hack led to immediate access to a large market of target users.
I sat down with Roger & Marc from Trixta to strategize on crypto growth hack experiments.
Key insights:
- You can never have too many post-it notes;
- Think about the customer lifecycle: acquisition, activation, retention, referral, and revenue;
- Design and test multiple marketing channels;
- Select and focus on channels with high volume, high conversion, and low cost;
- Measure deeper down the conversion funnel;
- Segment and select channels and customers by conversion rate;
- Awesome overview here:
Support select companies’ growth hacks:
- Join the Trixta waitlist to get early access to the platform;
- Sign up for Blockade Games’ Neon District Founder Key sale waitlist;
- Request access to the Paperchain beta.
Values Workshop
Values are an important part of hiring and team building. This exercise is particularly useful for distributed teams who need to align on their work culture.
I facilitated a workshop for Blockade Games using a framework provided by Eric Friedman. At a high level, all team members are asked to 1) write down the names of individuals (living or not) who they respect 2) reflect on why they respect them 3) write down attributes or values that describe these individuals 4) group common values into ~5 buckets.
0x Technical Workshop
We had the privilege of hearing from Jacob Evans and Blake Henderson from the 0x team. 0x is an open, trustless, and permissionless protocol that enables the peer-to-peer exchange of ERC-20 tokens on the Ethereum blockchain, providing liquidity to decentralized exchanges (DEXs). The vision for 0x is to create a tokenized world where all value can flow freely.
0x’s protocol allows trade requests to be matched off-chain and then executed on-chain through a 3 step process 1) users show intent to trade (order) 2) users find intents to trade through relayers who host order books and match makers and takers 3) a 0x exchange contract provides a mechanism for trades to be settled. 0x is non-custodial (funds remain in user wallets).
Relayers are important in the 0x network because they develop their own UX/UIs and order books, while conducting trades using the 0x protocol contract. Further, the 0x protocol allows for shared order books among different relayers driving greater liquidity and network effects, i.e. networked liquidity.
To learn more, check out 0x’s Discord and developer resources.
Founder Story: Will Warren
We later had the privilege of hearing from Will Warren, CEO & Co-Founder at 0x.
Key insights:
- If you were to start a crypto/blockchain company, now would be an ideal time. Developer tools are maturing and teams can focus on building unique products, rather than building all tools from scratch.
- Think very carefully if it makes sense to issue a network token.
- Design a flexible architecture —the tech stack is rapidly evolving and may become outdated very quickly.
- Transparent and robust governance (who has the power to upgrade smart contracts) is important.
- People don’t like to be forced to use or buy a token just to use your app — this creates significant friction. The infrastructure required to eliminate this friction is not good enough yet. Minimize the amount of friction through smart design.
MasterClass: Fundraising with David Cohen, Co-CEO & Co-Founder of Techstars
We had the privilege of hearing from David Cohen. Previously, David was a founder of several software and technology companies. He was the founder and CTO of Pinpoint Technologies which was acquired by ZOLL Medical Corporation (NASDAQ: ZOLL) in 1999. David was also the founder and CEO of earFeeder.com, a music service which was sold to SonicSwap.com in 2006.
With 1600+ Techstars companies raising more than $6.2 billion in funding, David had a ton of experience to share on best practices.
Here is a fantastic crash course on how to pitch to angel investors:
Key insights:
- Ask directly for an investment (“can I count on you to commit $25K in my company’s round today?”) — then learn about the conditions through reflective listening. A soft commitment is an agreement to invest a specific amount of money with specific well-understood conditions. Always follow-up investors meetings with an email with written terms.
- Start with a low but realistic fundraising target — let the market push up the round size.
- Raise enough money for 18 months (you can’t control revenue, only expenses).
- The real power of the workshop was walking through commitment scenarios and a role-playing exercise.
MasterClass: Fundraising with Alex Iskold, former MD at Techstars NYC
Alex has helped 100+ companies raise capital. Every financing is different. There are patterns but everyone’s experience is different.
Key insights:
- Qualify investors in your funnel: Do not waste time chasing the wrong people or randomly reaching out to investors. First, answer the question: given how much capital you are raising and your type of business, who are the right investors to fund you and how should you approach the raise? Be strategic and create a short list of investors/angels (e.g. B2C angel investor in NYC who invests in seed rounds). Ask investors about their process for making an investment decision.
- Think like an investor: Investors are trying to understand whether if they give you money, your company will become profitable or reach a big milestone resulting in a higher valuation. Build a financial model and develop metrics that keep your accountable. At an early stage, people invest in people, not businesses.
- Start small before going big — go after smaller checks first ($25K — $50k) and build the base of your round. The first commit is key. Then create artificial pressure / FOMO.
- Check out 30 questions investors ask during fundraising.
Legal Workshop with Global Network Partner: Cooley
Key Insights:
- Cooley has an amazing set of free resources and templates for early-stage companies.
Group R&R in Hudson, New York
After a 5 week marathon, the teams escaped the concrete jungle for a 2-day retreat in Hudson, New York. Waterfalls, fresh air, buffalos, and fun.
My favorite workshop involved identifying personal life milestones on a timeline. We then walked through our life stories of peaks and valleys with a small group. The entrepreneurs’ journey is marked with common highs (Techstars experience) and lows (mid-20s). Keep things in perspective. Life is precious.
