Since the beginning of the year I’ve worked closely with at least 5–10 startups that pivoted away from crypto.
Pivots are a normal part of startups, and most these startups had sound reasons for pivoting. For example,
- They are not growing and ran out of ideas to grow.
- They don’t wake up excited about what they are working on.
But I want to address specifically the idea of pivoting away from crypto. Because I’m quite certain the thought of this has crossed the mind of virtually everyone, especially if this is your first bear market.
Truth be told, I’m a little disappointed whenever a founder gives up on crypto, but if the pivot indeed makes sense I wish them the best, and if possible would love to be part of the next part of their journey. Nevertheless, here are a few things to think about when making such a decision. The point of all this is not telling you not to give up on crypto, but to incorporate these factors in your decision-making process.
Bear Market Sentiment
The 2nd half of the 2nd year of the bear market is when sentiment hits rock bottom. I’ve talked about this numerous times on Twitter and podcasts in the past, as I’ve seen this happen not once but twice before.
I’m not sure why this always happens, and by extension why crypto cycles always last 4 years. Maybe it always takes 1-2 years for reality to set in psychologically. Maybe it always takes 4 years for people to forget the boom and bust and the lessons from the last cycle.
Either way, this cyclical sentiment is so predictable now, that I would think critically about whether my lack of conviction has something of real substance behind it, or it’s merely caused by sentiment. I would try my best not to let sentiment drive my decisions.
Regret Minimization
Everyone I know that left crypto in the last bear market regretted it. Everyone who tried to convinced them to leave crypto last bear market became a laughing stock when the bull market returned. Again I talked about this a few times in the past.
Now, this time could very well be different, no one knows. But I would try my best to minimize risk of regret. One way to do that is to give myself a deadline and exhaust all the good ideas I have in crypto before moving on. “At least I gave it a shot”.
Nonlinear Growth
Many founders, especially those who come from FAANG, YC, or the traditional startup world, leave crypto because they expect the kind of growth trajectory that is normally expected in Web2.
The fact of the matter is that the growth trajectory of crypto products has rarely been smooth. Rather, most products grow in a staircase fashion. This is especially true for the more “crypto-native” products. And this is largely due to the cyclical nature of the broader market.
Now, you could argue “I don’t want to depend on an external factor that’s outside my control, ie, crypto growing as a whole“. That’s certainly a reasonable view. But the counter-point is every successful crypto company in history had to take this risk. Every one of them had an unwavering vision about the future of crypto. If Coinbase gave up on crypto because they weren’t growing 5% WoW, they would have done it in 2014 and never made it this far.
Discovering a Secret
Part of building a startup is finding a secret that no one else knows. In crypto, I’ve seen that for founders who are new to crypto, it usually takes at least 1–2 years to “find that secret”.
Why does it take so long? Well, I suspect it’s because crypto is so counter-intuitive and so different from Web2 or TradFi, where most founders come from. Way too often, founders give up on crypto in less than 1–2 years, right before that critical juncture.
Adding insult to injury, the bear market is arguably the best time to find that secret. There’s far less froth and distraction. Founders can think more clearly. They are more likely to find users who are also here for a long time to come.
Unfair Advantage
Conversely, succeeding in a new industry requires that the founder knows a secret that no one else knows.
So a key question to ask yourself before chasing the new shiny thing is “do I have an advantage in this new industry?“ If the answer is no, chances are you are better off staying in crypto because after 1–2 years you already know a lot about crypto.
You now understand why crypto matters. You have built a powerful network. You walk in the shoes of the users all day every day.
