I shut down my Web3 startup. Here’s what I learned (part 2)

The startup life is hard – internal and external circumstances can cause a company to unravel almost overnight. This was certainly my experience with Voyage Finance.

In part one of this series, I outlined why and how my team and I failed to accomplish our goals. In this installment, I’m sharing the hard-won lessons I learned from the failure for other founders.

Photo credit: Kaspars Grinvalds / Shutterstock

Bet sizing is everything

It’s necessary to clarify what the term “startup” means as this frames the rest of the discussion. Defining the word may seem trivial, but it’s surprisingly difficult.

In this essay, I define a “startup” as a company with a novel business model that uses technology as its primary lever to create or disrupt a category in some vertical.

This hypothetical company hasn’t figured out a repeatable way of turning a steady profit – an objective that is often called the product-market fit (PMF), which is the holy grail in startup land.

To get there, a company must first be what programmer-investor Paul Graham calls “default alive.” Founders must carefully ration financial and human resources so that the startup has a sufficiently long runway to achieve that status.

Getting to default alive and subsequently PMF is incredibly challenging. Most companies never find PMF.

The process of reaching this promised land consists of a series of experiments, with each building on the data gleaned from prior iterations. The free market is the lab, the technology is the equipment, and the consequence of failure is the death of the company.

The optimal approach is to make the experiments for a given hypothesis as cheap as possible until one of them works. Although a startup consumes many types of resources, the most important ones to conserve are time and money.

At Voyage, we aimed to build a credit product for the GameFi niche, but we made the critical mistake of investing heavily in our central thesis at the start, resulting in a 30% loss of our resources.

Had we sized our initial bet down, not only would we have had more time and money for other experiments, we would have also been able to discard the sunk cost of earlier trials and pivot decisively.

Teams are levers, not bootstraps

The first thing most founders do is build a team, and the impetus to do so is even stronger if they have raised external capital, particularly through VC funds.

Our first task at Voyage was to form a team we thought would be large and strong enough to help us implement our vision. Within a month, we hired two software engineers, a product manager, and a business development associate.

Founders are the best product managers

Every round is the last round

Expected value and conviction