Karim’s Thoughts

This post will be the first of a series that reviews and summarizes the lectures of Professor Dawn Song’s Entrepreneurship in Web3 MOOC course at UC Berkeley.

Lecture 1

The first lecture starts with the introduction of Prof Song’s teaching counterpart, Haseeb Qureshi (who isn’t a faculty member or even professor). In fact, he’s a former professional poker player turned Crypto Venture Capitalist (I guess gambling does pay well haha).

Reality about Startups

Whether you had this opinion before watching the lecture video or not, startups have been greatly romanticized in the last few decades. A lot of people from engineering, business, and many other backgrounds want to be a celebrity figure leading the latest company solving the world’s most challenging problems. There’s nothing wrong with dreaming that big, it’s just we all have to face reality that most of us will never reach that level of fame, wealth, and pressure. Still, startups are part of the natural business cycle. Existing companies won’t be around forever and they eventually get replaced in the same ways that today’s giants (Alphabet, Apple, Alibaba) replaced the previous giants (Enron, IBM, Eastman Kodak).

To really understand startups better, Haseeb goes into the differences between established corporations (right) and startups (left) which I summarize here:

Although nimble and courageous are viewed as positive traits, startups are hard. In the video, Haseeb provides data that demonstrates startups that raise a seed round, only have a 20% success rate in raising another round after that! Even more daunting, 97% of startups that do raise a seed round NEVER cash out (IPO or get acquired). You can video statistics for subsequent rounds around the 11th minute mark.

The point is that, MOST STARTUPS FAIL. So statistically speaking, you are almost guaranteed to NOT become Steve Jobs, Elon Musk, or any other rich and cool millionaire you can think of. In a weird analogy, startup culture is similar to a subset of today’s music. We are surrounded by advertisements for accelerators, incubators, and online courses to launch a startup similar to how songs like Codeine Crazy, Mask Off, or It Wasn’t Me are popular. Just because it’s all around us and it’s fun to look at/listen to doesn’t mean we should all be doing it.

An interesting question now arrises. Why is that now more than ever (Haseeb uses the example of just asking your parents) are people more interested in startups more so than any other time in history? He credit’s this to the decline of nominal interest rates which have trended downward for the last 700+ years. Essentially, we are living in an age where information is flowing faster and cheaper (in many cases free) than any other time in history, and we have more resources than ever before. Moreover, he shares a chart where we can see that there’s a micro inverse trend between the number of startups and interest rates where more startups are created as interest rates go lower. This means more money flows into startups at times where more ideas are needed as a primary goal for any nation-state is to continue growing its economy.

Okay so, if you won’t get rich and you don’t want to die trying, but we also know that startups are an essential part of our economy, why should YOU try to start a startup? Honestly, it’s passion. It should be something that’s been on your mind for months and it’s the first thing that’s on your mind when you wake up and the last thing that’s on your mind when you go to bed. At this point, you wouldn’t mind putting it the energy, money, and time to solve your problem because it’s already ruining your life.

Cryptocurrency Startups

In this section, we’ll focus on the difference between crypto startups and other tech startups such as business-to-business (B2B) or Software-as-a-Service (SaaS).

Cryptocurrency, or crypto, is going through a rough winter. Even before, when Bitcoin was trading at over $60,000 per coin, crypto was no angel. Several countries, perhaps China being most prominent, banned cryptocurrencies. There was also plenty of negative press about crypto and Non-Fungible Tokens (NFTs). As Haseeb put it, crypto is inherently subversive and extremely volatile.

A unique challenge that you may face as a founder in this space, is that because of the volatility, it’s extremely difficult to determine if you built the correct product to solve your customer’s problem (aka product-market fit). If there was some stable valuation of your underlying asset or transaction mechanism (things dollars or euros) then its easy to measure your sales or revenue. When your coin is swinging 30-40% in value per 24 hours or growing or dropping in orders of magnitude per week, measure then becomes infeasible.

Another differentiator for crypto startups are that they are usually open-source and public. This means that for founders, their community, especially their developers and users are the key to their success. Get too many negative comments on GitHub or Reddit, and your company could go under overnight.

The Steps to Building a Startup (by Haseeb)

1. Learn
Resist the urge to just build. This is especially true for engineers! If you’re not an engineer, get a little technical. Learn enough so that you are not clueless and you can at least participate in conversations.
Instead, spend time learning. Learn about the culture, lay of the land, the current and past products, and the history of your space.
Spend time speaking with customers and if you really want to learn, go work for another startup in the same space! Experience is the best teacher.
Read.
Meetups.
Hackathons.

2. The Team
Believe it or not, friends make the best cofounders. According to Haseeb, the leading cause of company failures is divorce aka cofounders breaking up. So find someone that you trust with your life and know can get out of any situation. That being said, it’s hard to pick who should be the CEO and even harder to handle equity splits. Still, it must be done because if not, it will be a red flag to investors and even worse, potentially block your company some day.
Can you do it solo? Yes. What are your odds? Worse.

3. Pick a great idea

4. Validate your idea

5. Raise money

Note, the last 3 are going to be covered in greater detail in later lectures and subsequently, latter blog posts.

A brief history of crypto

Until 2009, you could not send money through the internet. Your brick & mortar bank was your best option. Satoshi Nakamoto, addressed this by creating the first ever internet native money, Bitcoin.

Bitcoin itself is very simple and you can’t do much other than sending money. The motivation to be able to do more, motivated the creation of alt coins (alternatives to bitcoin) and eventually, Ethereum. Ethereum’s differentiator was that it had a Turing complete scripting language that allows Smart Contracts. See the lecture video at 1:11:00 for a great explanation on why Smart Contracts are such a big deal versus traditional contracts you’d signed at your lawyer’s office. Long story short, they allow for binding agreements in code between parties where money is involved. Before Ethereum, and before crypto, this wasn’t possible online. Another analogy Haseeb uses is the printing press. Think of all of the newspapers that published damaging news overnight before the internet. Ethereum and the press share the commonality that they allow for innovation without permission.

Conclusion

We covered a lot in this lecture/post. Hopefully, you found this as interesting as I did and want to continue reading or watching the videos. Feel free to comment or discuss!

TL;DR – Creating your own startup is fucking hard. Creating a cryptocurrency startup is even harder. This course will familiarize you with the landscape of startup land and help you decide if you should walk away, join a crypto startup, or even found your own.