Navigating the bear market
Focusing inward before stepping on the gas
We are now in a firm grip of the bear market. With concerns about rising interest rates and an unpredictable regulatory environment, markets are jittery. In its 14 years of existence, crypto has seen multiple market cycles. The last bear market started in December 2017 when Bitcoin tumbled from its peak of $19k and it took 2 years for Bitcoin to reclaim this peak. Will things be different this time? In the last bear market, crypto was still in the discovery phase, where users were wondering if blockchain assets were a legitimate long-term trend or a fad that they missed out on selling the top. This time, the top industry players, including AWS, Google, & Reddit are moving into web3 products, and top banks and exchanges such as JP Morgan, Franklin Templeton, Nasdaq are testing the waters by settling transactions on-chain.
It's always darkest before dawn, but we are here to help. Here are 6 things you can do to deal with the bear market blues and position yourself for what comes after:
1. Get a clear understanding of your runway- Check your treasury balance and extrapolate your costs for the next 12-24 months. Make sure you understand your unit economics clearly and evaluate if your product can acquire new users profitably. Keep your burn rate low - review your current expenses and see what areas you can cut costs. This will help increase your runway and give you more time to execute your vision. Review your team and make sure you have the right mix of people to execute your vision.
If your project has a token, understand the token economics and make sure your treasury is diversified. This will help you weather the storm and not run out of cash. Some of the most successful projects such as Maker saw a 70% drawdown in the value of their token. Try to get grants and support your runway. Most blockchain teams conduct hackathons and give grants for promising projects.
2. Talk to your community- Community becomes critical as they are the ones that will help you weather the storm. Your community is willing to test your v1 product and give you honest feedback so that you can iterate to PMF. You can figure out where users are getting stuck in the product flow and try to add features that nudge users toward completion.
Your community can also help you with business development by introducing you to potential partners and helping you find the right talent. Attend developer hackathons and talk about how your product can help users. Camille Ricketts, ex-head of Marketing at Notion shared a framework for startups building strong communities depending on the type of product and the stage of growth.
Don't launch a token if you are still figuring out how to get to PMF. If you have PMF, you can use tokens to crypto-economically incentivize and encourage fruitful participation of different entities. Launching a token just before a bear market can be disastrous as your token gets beaten down by the market and volumes dry up, leading to dissatisfaction amongst your core supporters. A more opportune moment would be when we are transitioning out of the bear market. Token holders get to see price appreciation as the market turns and your product is getting adoption.
However, launching a token at any time is a decision that has to be seriously contemplated amongst your team. In the words of Starknet founder Eli Ben-Sasson - "It's like ripping your heart out and letting the market decide what to do with it.” If you already launched a token, ensure you clearly understand your community’s needs and how you can help them during this time.
3. Focus on your product’s core value prop- Figure out your product's core action and get your product in front of users. Bear markets are a good time to release early versions of your product to a small group of beta testers and gather feedback. Figure out where you are in the product cycle- Getting to PMF, scaling your product to reach more audiences, or getting to a dominant position.
If you are striving to hit PMF, it is vital to gather feedback from early adopters, refine your product based on user insights, and continually iterate until you achieve a strong product-market fit. On the other hand, if you have already attained PMF, your focus might shift towards scaling efforts, expanding your user base, optimizing distribution channels, and enhancing your marketing strategies.
The building phase in Web3 tends to be more challenging due to the evolving landscape, technical complexity of the underlying technology, and inherent risks of smart contract vulnerabilities and regulatory uncertainty. If you are building a new Defi protocol, you will need time to experiment with the design before you can deploy real funds.
4. Get your business model right- Make sure you clearly understand your revenue streams and how they will be impacted by the bear market.
If you have a product that a niche group is using obsessively, you can introduce a premium segment. Testing out a high price point is fine; take Dune.com they moved from free to $420/month for hobby developers. Quite expensive for a hobby! Don’t be afraid to test what the right price the market is willing to pay.
You should also think about ways to diversify your revenue streams. Many NFT projects such as Wassies, and Pudgy Penguins are seeing a drop in royalties and exploring alternative source of revenue such as hotels and toys.
5. Iterate your product positioning. When you are building in a competitive arena, product positioning helps you determine the right consumers and differentiate yourself in the minds of these users.
Get your story straight- you need to tell your story compellingly to resonate with your audience. Nansen, Dune, and Arkham are web3 data analytics platforms - but each of them identifies a particular target market to tackle - Nansen is for ‘the smartest investors’, Dune is ‘data for the community’, and Arkham is aimed at ‘ real world users and institutions’.
Questbook is an example where they iterated from web3 tutorials to a platform for grants. Buildspace started as an education platform but is positioning itself as a place for hackers to find other hackers and ship projects together.
6. Revisit your go-to-market strategy. Be very conscious and targeted on how you spend money on marketing. Leverage organic and low cost-marketing strategies as much as possible. This will help you focus your resources on the right partnerships and user adoption initiatives.
Identify the right conferences and meetups to attend to reach your target users. Build relationships with the right influencers and thought leaders in your space. This will help you amplify your story in front of the right audiences.
Lastly, don’t give up. This is the moment to stay true to your vision and remember why you began in the first place. Remember, bear markets may momentarily diminish your spirits, but they are the crucible in which the underlying foundations for revolutionary apps and innovative use cases are forged.