Web3 Popularization丨Why is it best not to issue coins for blockchain startups?

Two weeks ago, I talked to an entrepreneur who does a financial audit of a crypto fund, and the topic talked about how blockchain entrepreneurship is different from traditional Internet entrepreneurship.

My point of view is: if the traditional Internet entrepreneurship is nine deaths, then the blockchain entrepreneurship is definitely nine deaths.

Why is there such a view? Doesn't blockchain represent the relationship between advanced productivity and production?

Friends who are familiar with Honglin's lawyer know that I am a big believer in blockchain technology and a Bitcoin enthusiast. But this does not prevent me from seeing the shortcomings of entrepreneurship in the current blockchain industry: entrepreneurial projects that use blockchain technology and user sharing rights and interests incentive thinking are easy to succeed, but projects that issue coins, especially those on exchanges, are more likely to fail.

Based on my own experience in starting a business on the Internet and my observation of the current blockchain industry, the project that issued coins seems to have added a booster, and it will succeed faster, or hang up faster.

01, ask for trouble to issue coins, dig your own pit

Around the end of 2018, I took a course on token economy design held by Meng Yan in Beijing for several days in the winter, thinking that I could learn such a skill so that I could better fool investors when I returned to Shanghai.

My biggest takeaway after taking the course is that blockchain entrepreneurship is definitely not something that a start-up team can do.

Because of the design of Token, at best, it involves the formulation of macroeconomic policies such as monetary economy (although it is a mini version), and at a small level, you are also faced with the microeconomic incentive design of various behaviors of users or ecosystems, which is a worry that traditional Internet entrepreneurs do not need to worry about at all.

Traditional Internet entrepreneurs only need to pay attention to: user needs, product development, marketing, revenue growth, etc., for the blockchain entrepreneur team, in the early stage of entrepreneurship is faced with such a sinkhole of "economic model" design.

You can say that the existence of Token can theoretically reduce the user's customer acquisition cost or increase the efficiency of marketing, but the reality of the slap in the face is that the users attracted through the Token method are often not really target customers, but just to make wool.

Many blockchain entrepreneurs I have seen go to external service providers to design their own economic models after completing traditional Web2 project products and business models, although in the end they help you deliver the white paper design, it may be the work of an intern who has just graduated from college that you have spent a lot of money to buy.

Of course, this is still a sufficient budget, in this area of friends who do not have a budget, may be like the website "User Agreement", "Privacy Policy", in the market to find a bidding opponent directly copy over and adjust the parameters to make do with it, after all, except for those academic industry observers, no one to read the project party's white paper seriously, not to mention those economic models that do not understand.

So it's not surprising at all that you see that the coin issuing projects on the market have fallen into a death spiral not long after they went online. For entrepreneurs who have issued coins on the exchange, the collapse of the project is definitely a high probability event from a mathematical point of view, which will not have a particularly big relationship with whether the team has done a good job in the product and how quickly it can attract new users to enter the market.

But when it collapses, it depends not only on luck, but also on the endurance of the project party. For example, how long can the project hold up the narrative of the project? Either how quickly the entrepreneur pulls the next financing party to take over, or how fierce the market value management operation of the project party in the secondary market is.

Listing is not a goal, but a major milestone, and the same is true for coin issuance. However, for entrepreneurs who are traditionally listed, they have at least gone through a few years of experience before listing, and they have at least some physical and mental experience. However, the projects listed on the coin can be inconsistent.

Why should the project worry about the management of the secondary market? On the surface, it is to create liquidity, but the truth of the matter may be: the secondary market is smashed no longer care, and the project will collapse in minutes. And this embarrassing situation happened, many times it was the project party that asked for it - yes, it was the investors of the crypto funds that the project party found itself at that time.

Friends who are familiar with the operation logic of crypto funds know that as a fund manager, its income comes from two pieces.

The first is the annual management fee, which can also cover the fund's daily hard-earned money. The real way to make a lot of money is to look at the income after the project exits. Therefore, for the trader of the fund, unless 99% of the money of the fund is his own, he will definitely not be the person who has a long-term affection. He is willing to risk losing all his pants to invest in a start-up project like yours for only one reason: he wants to make money in a shorter period of time and leave the market. After all, only the money in hand can share the prize.

For entrepreneurs who finance Token, it will feel that making money is as easy as breathing, but from the perspective of investors in crypto funds, which fund leader can not be confused when he hears that the project can be withdrawn after 9 months of investment?

The short-term and fast investment method of the secondary market has been put into the traditional primary market, which leads to the fact that for those entrepreneurs who have successfully entered the exchange, the happy life may be the day they go on the exchange, and then they are facing the crazy selling of investors who continue to unlock the period.

How can this rapid growth flywheel be avoided? There is only one truth: to protect the country. Through acquaintances, introduce those teams in the coin finding circle who charge for market value management. As for how long it will be stable? This usually depends on the budget and psychological capacity of the project party. Therefore, the matter of financing tokens seems to be a temporary cool time to take money, and when I do market value management, I know that this is a crematorium.

02, if the main business is unstable, invest abroad, and die by yourself

Another reason why blockchain startup projects are prone to collapse is that the founder's heart is swollen, unwilling to be just a leek of capital, trying to become a mature sickle.

How can I turn the money I raise into more money? There are two ways to do this.

The first is to focus on the main business, overcome technical problems, do a good job in user research, research and development of good products, and users to mingle, do a good job in marketing, this way of success rate will be a little higher, but sure is to get rich too slowly, if the blockchain entrepreneurial team is not too talented, refer to the path of traditional Internet company entrepreneurial development, at least 3~5 years to lay the foundation.

The other way sounds a lot sexier, engaging in investment. Use your own project name to exclusively name an ecological fund, and if you think that any project has the potential to get rich than your own project, you will go up and invest a little, after all, the money is not earned by yourself, and it is not worth feeling distressed. This kind of mysterious operation is completely incomprehensible to friends of traditional Internet entrepreneurs.

To be honest, I saw that many blockchain entrepreneurs on the market with a financing amount of only 10 million yuan have generated their own investment funds and want to invest in foreign projects.

In the history of business, which company that has successfully operated in the early days did not focus on the development of its main business and became the industry leader or leader before it began to make financial investments?

Blockchain entrepreneurs start to make financial investments when their main business has not yet run smoothly and the project has not been able to support themselves on their own.

Some friends will say that this is the project party doing ecological layout. That's kind of. After all, the vast majority of blockchain product users have not yet seen their daily, weekly, and monthly activities.

One of the important reasons for this phenomenon is the impetuousness of blockchain entrepreneurs. It's easy to get money in the market, I hope to learn from the capitalists, and then rely on other people's money as leverage in the market to fight for greater returns.

In the past decade, the blockchain industry has developed very slowly.

03. Don't use China's regulatory restrictions as an excuse

When things are done, they say that they are talented and all kinds of awesome, and if things fail, they say that the general environment is not good and there are problems with policies. Is this really the case?

In the concept of many practitioners, doing blockchain entrepreneurship in China is something that can't be done and can't be done. But I don't think so.

Those blockchain practitioners think that the state is specifically targeting you to do the things that are restricted, in fact, in any other industry, in fact, the same. For example, everyone is familiar with the ICO initial coin fundraising, and everyone may not be soberly aware that in any period of China's development, startups in any industry seem to be unable to raise funds directly from the public. Therefore, for the crackdown on illegal and criminal acts, blockchain entrepreneurs can easily not take it from themselves, and in the eyes of the regulators, they really don't care about you.

04. Conclusion

There is a poem in Mr. Mu Xin's poetry collection, called: **Curves are sweet, straight lines are salty. **

Some words in this article may seem unpleasant, but as an Internet entrepreneur who used to be regarded as To VC, after burning hundreds of millions of investment funds and stepping on the self-inflicted pit on the road of N entrepreneurship, after watching many blockchain entrepreneurs rise and collapse their high-rise buildings, I still hope that you can ponder the project you are starting a business and how reliable the project is? Is it really necessary to issue coins? After all, there is no turning back when you open the bow, and sooner or later you will have to pay it back.