The State of Web3 & Surviving the Bear Market as a Founder: Insights from Maex Ament of Centrifuge
Feb 21, 2023
In the fast-paced world of crypto, market conditions can shift rapidly. The crypto market has seen both bullish and bearish trends in recent years, and it’s crucial for founders and investors to adapt their strategies to the current conditions. In our first episode of Founder’s Playbook, we spoke with Maex Ament, Co-Founder of Centrifuge and previously Taulia. Backed by Coinbase Ventures, Galaxy Digital, and other leading VCs, Centrifuge tokenizes real-world assets and allows users to borrow against them. Users can take any real-world asset such as mortgages, invoices, and carbon offsets, and finance them on-chain.
In our conversation, Maex shares his insights on how to survive and grow in a bear market as a founder. In this article, we’ll explore some of the key takeaways from our talk with Maex on raising funds, marketing vs community, valuations, and more.
Raising in a Bear Market
When Centrifuge was raising in the 2018 bear market, Maex and his team chose to work with a mix of traditional investors that mainly focused on SaaS and Fintech companies. This approach helped with their raise as they were not limited to just crypto VCs, who were more careful and hesitant to invest during the bear market. Maex emphasizes the importance of survival in the current market conditions. Founders need to do whatever it takes to survive long enough in order to increase traction and metrics for their project in an effort to convince investors to give their startup additional capital. If that means cutting burn, delaying hires, or cutting salaries, founders must be willing to make those tough decisions. In a bear market, founders must leave their ego at the door and be willing to go lower in valuation if needed. Finally, Maex reminds founders that it’s essential to get used to “no” as an answer. This can be tough for newer entrants who are used to the 2021 market conditions, where it was much easier to create hype and FOMO around their project and close rounds early by giving investors tight deadlines to commit.
Marketing vs Community
Many founders confuse having a good marketing strategy with having a big community. Maex believes that depending on your project, having a large following on social media platforms like Twitter and Discord doesn’t necessarily translate to success. Instead, he recommends focusing on more traditional marketing strategies, like attending conferences and talking to journalists. Conferences can offer a great way to connect with potential clients, and good media coverage can be more effective than social media in some cases. Maex advises founders to pick fewer but relevant events and make a big deal at them. In a bear market, founders should de-emphasize community and focus more on traditional marketing strategies.
Figuring Out Valuation When You Don’t Have Metrics
In a bear market, Maex suggests that founders should stop focusing on their valuations as much and instead center in on figuring out how much money they need to build their project and go from there instead. As far as figuring out your valuation when you’re just getting started and don’t have substantial metrics, Maex believes that it’s easier to let VCs set the price instead. The more interest there is in your project, the better the valuations will be. Founders can also compare themselves to their competitors to get an idea of what valuations they should be aiming for.
Advantages of a Bear Market
While bear markets can be challenging, they also offer some advantages for founders. In the pre-seed stage, many deals are still being done at more reasonable valuations, and good founders can still secure pre-seed funding. Despite the market downturn, money still needs to be deployed, and the pre-seed stage remains a founder’s bet (so work on selling yourself!). Additionally, previous bear markets have shown that it may be easier to find the right co-founders and raise funds since there are fewer companies being built. Hiring is also often easier and more cost-effective during bear markets, and there may be more merger and acquisition opportunities available. Despite the challenges of a bear market, it is possible to turn it to one’s advantage with the right approach.
Maex’s Key Areas of Interest for Builders to Focus on in the Bear:
According to Maex, there are a few interesting areas that builders can focus on during this bear market. One area of interest is REFI, which can help solve climate change. He believes that REFI is the perfect example of why crypto was created, with DEFI protocols and tools designed to create real-world impact. By utilizing Web3 tech we can build new markets from scratch making it possible to improve price finding for products such as carbon credits. Additionally, Maex emphasizes the importance of tooling, such as DAO tooling, cap table management, and vesting, to allow DAOs and Web3 projects to operate more effectively.
Maintaining Visibility During a Bear Market
Maintaining visibility during a bear market can be challenging, but there are some strategies that can help. Firstly, it’s important to recognize that user numbers are unlikely to reach the heights seen in 2021, so it’s better to focus on key users and understand their specific needs to effectively monetize them. Builders should focus on what really matters by identifying the core value of their product and determining what their users really want. If working in the B2B Web3 space, it’s beneficial to find a few good anchor clients and leverage them not only for monetization but also to promote and market your project. By focusing on a few key clients, builders can create momentum and attract further interest in their products.
Differences Between 2018 and 2022 Bear Markets
Maex notes that the differences between the 2018 and 2022 bear markets are significant. While 2018 was mostly a crypto-specific bear market, the current financial winter affects all markets, including the Web3 space. In 2018, investors paused on crypto, and discussions about raising were limited. However, the current market is different, with pre-seed and seed rounds being done, and even some A and B rounds for promising projects. The crypto ecosystem now has more users, better metrics, and wider exposure. This is due to the increased push from users, the VC community, institutions, and speculators, resulting in more liquidity within the crypto ecosystem. It’s essential to recognize that 2022’s challenges are broader than the previous crypto winter, but the overall increase in support for the crypto space may help it weather the storm.
In conclusion, navigating a bear market can be challenging, but it’s not impossible. By focusing on survival, fundamentals, and opportunities, founders can weather the storm and come out stronger on the other side. And while the differences between the 2018 and 2022 bears are significant, the principles of building a successful Web3 project remain the same: focus on creating real value for users and stakeholders, and the rest will follow.
A full archive of this episode is available on our YouTube channel
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