The new normal

When we first started writing about startups at TechCrunch the idea of a startup – a small business with global ambitions – was a pipe dream. How could a side hustle like Twitter turn into a mouthpiece for heroes and villains? How could a video uploading service like YouTube destroy the media industry? How could a blog – a blog written by a perpetually exhausted ex-lawyer from his bedroom – upturn and change the entire process of building, growing, and selling ideas?

But it happened. In a few years – between 2005 and 2010 – the world changed. TechCrunch became aspirational reading. Millions of would-be entrepreneurs sat in their cubicles scrolling down the river, wondering when it would be their turn to hold a comically large check from a VC in a fleece vest. I distinctly remember talking to two Dutch startuppers in 2007. They told me about a good idea they had based on scientific work they had done. They asked, quite simply, if they should quit their jobs. Three years before the question would have been ludicrous. Give up a cushy job in academia for a long shot? Absolutely not.

But on that afternoon, two years into the startup revolution when getting funding was as easy as getting a post on TechCrunch, the long shot was the better bet.

Now we’re facing a new normal and many of the advances wrought in those years are being reversed. In 2014, risk aversion and VC bag-holding behavior slowed angel and seed investment and startup growth beyond the behemoth b2b solution stalled. Further, an insipid culture of the Creamery, conferences, “passion,” and Allbirds. As I traveled the world I noticed that every city – from St. Louis to Skopje – went through the motions of post TechCrunch-style entrepreneurship. Every city had its own conferences replete with mason jars of wheatgrass smoothie and cuddle rooms where co-founders could emotion-hack their feelings. Members of the speaker circuit told one of two stories – “You can do it!” or “You’re doing it wrong!” – and pitch-offs and hackathons sprung up like kudzu across the globe.

But the amount of VC cash available to support these dreamers is shrinking. It is easy to enter into the entrepreneurial lifestyle but it is far harder to build an entrepreneurial life. One friend quit his job four years ago and is now cashing out IRAs. Other folks I know are taking a break from startups and are nestling into the warm confines of a desk job. The bloom is off the rose.

At the same time I’ve been watching the ICO – or now Security Token Offering – markets explode. In a few short years a massive wealth redistribution has made a few bold folks very rich and their startups are becoming funds in themselves. Thanks to the egalitarian nature of crypto you can take money from a fifteen year old in Zagreb and a mafia bookkeeper in Moscow as easily as you could get it on Sand Hill Road in 2006. Arguably this new market is full of risks and investors have little recourse if their investors move to the coast of Spain and disappear but it is the new normal, the new startup methodology. And as much as VCs like to crow that they add value, they don’t. Money adds value and money comes from the ICO market.

I’ve been working hard to understand the companies inside this market and I’ve found it very difficult. First, if you’re an ICO-funded or blockchain-based startup, visit this form and tell me about yourself. I’ll be writing up a few of you over the next few months. Second, I’d like to offer a bit of advice from a being birthed in the transparency-induced fires of 2005.

First, as I’ve written before, your ICO press relations are awful. I’ll reiterate what I wrote a few months ago:

Here’s the bad news: your PR person sucks. Every single PR person I’ve spoken to is awful at crypto. There are a number of companies out there and I won’t single anyone out but if you have any questions email me at [email protected] and I’ll name names. Let me tell you: every single PR person I deal with, including internal communications managers, is awful. This isn’t always their fault because the space is so new but then again many of them are incompetent.

It is, thankfully, getting better. An ICO is essentially a crowd sale. Getting people to pay attention to crowd sales has always been nearly impossible. Kickstarter projects only started getting taken seriously after a mass of them succeeded in shipping and, as of this writing, very few ICOs have produced much of anything. The story, then, isn’t that you’re doing an ICO. The story is that a group of smart people are getting together to solve a big, hairy problem. That they raised $80 million from a bunch of nerds and gangsters is secondary or tertiary to the story unless, of course, the founders are found in a cage in a basement in Stockholm for not delivering on time.

Second, communication is key. I’ve reached out to a number of top 100 ICOs and they’re more secretive than a frat after a hazing accident. The thinking is that they’ve made their money and anything they say will affect the price because Reddit will say something bad about the coin. It is time to break this sad circle and decide that, once and for all, price should be more resistant to rumor and innuendo.

Both of these aspects of the ICO industry have been solved before. Startups once had awful PR and the only way Michael Arrington was able to get news was to talk to folks who passed on a deal and had an axe to grind. This sort of reporting is useful in the early years of an industry and will begin entering the mainstream as angry investors and ex-employees spill the dirt. But now startup PR is an accepted part of the business cycle. You can read about new fundings in the Wall Street Journal. Eventually the WSJ will cover ICOs the way they cover IPOs and then blockchain companies will really have to step up their game.

Second, communicating with the world is far more important than any ICOed founder thinks. Shareholder relations is an established industry and token holder relations will soon follow. But at this point the extent of token communications comes from a single person in a Telegram room whose job it is to delete trolls. Almost all the sites I visited had one email address – [email protected], for example – that went to a Zendesk installation that, in turn, sent emails into a black hole. If a potential retail angel investor can’t contact you, they can’t trust you.

The idea that a small group of smart people can create something amazing with funding that seems to come out the ether is wildly compelling. It is the dawn of a new era in funding and it should give every single fund pause. Many of them are on the bandwagon, dutifully meeting founders who spout absolute gibberish. Because no one understood startups in 2005, everything was a potential winner. Because no one understands crypto today, everything is a potential winner. It is in every entrepreneur’s best interest to close that amazing new self-help book, “Zero to One Hard Thing About Corporate Startup Building Handbook” while sipping bone broth and get some real work done. It’s the only way we’ll all move forward, and it’s about time we started the trip.