Insights On Running a Web3 Startup

On February 21st, our co-founder Marcel Fohrmann spoke at the Polkadot Updates hosted by Polimec, sharing insights from his startup journey and the lessons learned along the way.?

In this blog, you find a summary of the key learnings.

Please note the presentation isn’t a playbook. It’s just what worked for Subsquid and might provide some inspiration on how you could run your Web3 project. It’s also by no means financial advice.?

On failing fast?

One of the key ingredients for our current success is that this wasn’t Marcel’s first rodeo. Growing up in a family of computer scientists, he was exposed to blockchain early in 2016.? IOTA was the hot stuff back then, and everyone was excited about its potential.?

Everyone??

Not Marcel’s brother, who was critical of its consensus algorithm and devised a protocol with a different algorithm. Soon, people would want to fund their endeavor, and they started a company.?

Long story short, they failed to find a product-market fit and eventually had to liquidate the company. Their mistakes would pave the way to be successful in the next attempt.

“This guy failed; I’d give him twice as much money.”??

What he took from this experience is:?

• Teaming up with someone that complements you. In our case, Dima, the tech guy, focused on product, and Marcel, who brought the business and operations experience.?
• PoC: build a Proof-of-Concept as soon as possible.?
• Network, network, network: especially as a first-time founder not from the Ivy League, it’s hard. So you must try to be where people with money are and prove you can execute your idea. That’s where a PoC comes in handy.?
• Don’t be afraid of failure.?

Raising funds?

First off, the obvious. Spend the funds and effort to incorporate your company properly.?

Don’t underestimate the time and energy required to go through the process. And when you do, it’s best to ensure you are bankable. As Marcel shared, crypto banks are great for big institutions who need to custody crypto-assets, but for a start-up just getting started, the fees can quickly eat into the runway.?

It is best to go with a TradFi bank in this case. Plus, it might help raise funds, too - if you aren’t raising in crypto.?

“Stop wasting time with pitch decks.”?

We raised when we weren’t presenting a pitch deck and let the product, and numbers speak. What mattered was having something already sued by others.?

Another piece of advice by an investor Marcel highlighted was:?

“Don’t sell the steak; sell the sizzle.”?

Crypto markets run in cycles. VCs want to invest in the new shiny thing. Fortunately for us, indexing was just that during our first raise, and Polkadot had a moment. This made it easier to get investment. We were new and filled an existing gap. We were also faster than the competition, which helped.?

Surviving Bear market?

Subsquid started at the end of one bull market and survived the last bear market, thanks to lessons Marcel learned the hard way during his first company.?

One of them is that cycles also require downsizing. It requires re-thinking team structures and firing and hiring as necessary.?

When you always expect the worst possible outcome, you will do better.

And if you are not a consumer-facing app, it’s a good moment to focus your funds on product and not marketing.?

Our catalyst?

For Subsquid, the catalyst was building a product that people wanted and working on becoming self-sustaining, putting us in a strong position when negotiating with VCs. Add to that meeting the right people, like Coinlist.?

Our hard work paid off as of now. However, it’s important never to forget that there are factors one can’t influence, such as the price of BTC. If there’s no liquidity in the market nor appetite to invest, go back to building a great product.?

“If your product sucks, make a better one”?

We launched our testnet in collaboration with Coinlist and saw major traction - over 50k unique users, and among them, thousands that were technically savvy enough to deploy indexers.?

Once the timing was right, we ran a sale that closed in the record time of 19 minutes and was heavily oversubscribed.?

Marcel highlighted that it was a question of finding the right moment, and with the bear seemingly fading and Bitcoin finding closer to its old heights - this bet was spot on.?

Nevertheless, he also acknowledges that we’re still at the beginning of the journey, and continuous effort will be required to become the go-to place for everyone in Web3 to get their data.?

A word on CEX?

Without going into too much detail, one suggestion Marcel made is that ultimately, a CEX will care most about the user growth listing your token will bring them.?

Act accordingly within ethical bounds - obviously.?

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Good luck on your Web3 journey. And if you need to index data from EVM, Substrate or soon Solana and Cosmos, get in touch!?