Getting a startup off the ground is not always an easy feat, especially when it comes to crypto-related ventures. With blockchain technology still in its infancy, crypto startups face various financial, regulatory, and operational challenges that impact their success.
In this article, I share some lessons for founders working in operations in crypto startups. Most of this advice is based on my journey at Verida this year, where I’ve been focusing on four main areas; capital raising, finance, team, and governance.The guidance might not be exhaustive since working in a startup calls for involvement in many other areas, but it provides some helpful tips on how to take your crypto startup in the right direction. If you’re in a COO, Head of Operations, or Business Manager type role, read on.
The Capital Raise: There are plenty of online resources with informative articles on capital raising strategies, best practices, and personal founder experiences. Make sure you seek them out. Here are four key things that specifically helped Verida.
Prioritize the Capital Raise: The capital raise will consume a lot of your time. Prioritize it as a business activity. This is not to say other people in your team stop working on product or development processes, but kicking off other major initiatives for your startup while you are trying to raise could drag out the capital raise process and burn you out.
When raising capital, you will be speaking to investors in different time zones so there may be plenty of early or late calls you will need to work around. Before each investor call, make time to prepare and know more about the investor you’re talking to. A good understanding of their background and interests will help you tune your pitch and guide the conversation.
Get your legal position in order: Blockchain startups need sophisticated and knowledgeable legal counsel to navigate the rapidly evolving space. Get legal counsel in place who knows your startup’s intent and business vision will help you with complex issues such as corporate formalities, regulatory requirements, contracts, and more. They will support you through this process when any difficult issues arise. Ensure you have the legal instrument you are using to raise funds in place, whether SAFE, SAFT, or SAFTE, and the docs ready.
Have your pitch and investment docs ready to share: Prepare a great pitch deck that clearly articulates your ideas and concepts to investors. Not only will you feel more prepared going into investor conversations, but your investors will be confident that you have a clear vision, model, and plan in place. Besides a clean pitch deck, take your time to prepare other investment docs such as an investor summary one-pager and a lite paper or whitepaper.
Leverage accelerators to find the right investors: The social startup infrastructure (accelerators, incubators, angel networks, and more) makes it materially easier for founders to connect with global investors and raise early-stage capital. Being part of accelerators like the Open Web Collective and CoinList Seed helped Verida connect with investors through our journey and assisted with warm introductions which we could take forward. I’m not ruling out the possibility of succeeding through cold investor pitches- these do work, but they often take more time. Find groups and communities which align with your startup, and apply to join.
Accounting and Finance: Whether you’ve raised capital in fiat, stablecoins, or both, you will need to get your accounting and finance processes in place as you scale up. Here are some tips to help you run smoothly.
Document your processes as you go: Just as a startup should provide great product documentation for its users and developers, document your accounting policies and processes as you define them internally. How do you pay expenses in fiat? How do you pay employees? What tax obligations do you have in your jurisdiction and when? This will help you get your operational processes in order and is also great when you scale up and bring in the next team member who may be working in this area.
Have primary and secondary banking systems in place: As a crypto and blockchain company, dealing with the fiat banking system can feel slow and grating. But there may be times when it’s necessary to pay service providers or suppliers you’re working with in fiat. De-banking is a problem in many jurisdictions and a real disruption to a startup business, and something Verida has experienced first hand.
You can get around this by signing up with crypto and blockchain-friendly banks in your jurisdiction (unfortunately there still are few). I also recommend having a secondary banking provider as well in case you run into problems with the first. Ultimately, use crypto for payments as a first principle and maintain good record keeping.
Automate your processes to save time: There are tons of tools that you can use to automate your accounting processes. A good approach would be picking a reputable accounting system for fiat and another for crypto. Xero and Koinly are good options for financial record keeping and reporting purposes.
While these tools will streamline your bookkeeping processes, there’s a caveat in their use. Crypto accounting tools are still evolving and it can be difficult to setup crypto integrations with the major cloud bookkeeping solutions. This is a real industry gap, so you still might not get away from spreadsheets here and there, but automating whenever possible goes a long way to improving your processes.
Team Expansion: After raising capital, you will likely expand the team with key recruits to take your startup to the next level. Recruiting good talent takes time and pays off in the long run. However, bringing in the wrong team member can prove costly, so spend time to get this right.
Know who you will need and what will they can/will do: Before hiring, start by creating an outline of the key roles you need to help deliver on your roadmap. After identifying the positions, create effective job descriptions outlining the key skills required for that position. Be sure to include sufficient context about your startup, the benefits you offer, and why a candidate would be a good fit. Have your employment agreements in place and ready to offer when you find the right person.
Determine a job posting strategy: There is no shortage of job posting boards specifically for crypto and general all-industry channels. Don’t post your job on ten channels and hope for the best. Pick two or three targeted channels and start there. Depending on where you post and the type of role you’re advertising for, you may get a lot of responses, so be clear with your team about how you’re going to triage this. Verida used LinkedIn and CryptoJobsList as anchor sites for key roles, and then used Twitter and Facebook groups to share those ads. We also added a custom careers page to our website.
Have a solid screening process: Nominate someone from the team for screening calls with those candidates who have been shortlisted. Have a clear set of baseline questions and some that rate specifically to the skill set required for that role. For development-related roles, you might want to set some tasks and ascertain how the candidate would solve these challenges to get a feel for their approach to work. While this may take two or three calls, as early-stage key employees have the founders involved throughout the candidate screening process.
Create a great onboarding experience for your new team members: Many new crypto startups are remote-first companies. Creating bonds and camaraderie can take a little extra effort but is not impossible. Here’s where a simple onboarding plan comes into play. You can help new joiners get up to speed by pointing them to relevant company docs, guides on systems, and accounts set up to help get them up speed.
We set up team video all-hands calls and did introductions early on. During such calls, let the new members share a bit about themselves, their background, and something personal outside of work.
Governance, Risk, and Compliance: Governance is about determining what we should do and how we decide while ensuring accountability for those business decisions. Risk and compliance help us ensure we can achieve our objectives while navigating uncertainty. It may seem like an after-thought for a startup that just wants to get building, but getting a governance framework in place early that you can iterate on and mature over time builds a solid foundation for your startup as you scale.
Document your key decisions internally: It’s always a best practice to document your key decisions internally. Notion is a favorite tool at the moment for a lot of startups and the tool Verida adopted, but there are similar work and knowledge management tools out there.
When starting out, document key decisions around your technology, product, and overall strategy. What you do and don’t decide on and the trade-offs in pursuing one path over another. These discussions will often play out on calls, or async in chats. Capturing them for future reference and knowledge retention helps keep all team members on the same page.
Know your risk exposure and ensure compliance: Like any other startup, crypto projects should evaluate and build out a view of risk within their business model. There are many dimensions to risk, from security, regulatory, legal, financial, and operational to people and technology. Risks, if uncontrolled and realized, can prevent startups from attaining their business goals or even lead to huge damages.
Know how to identify risks, evaluate them, record them, and treat them. Have a routine process in place where you review your framework and work on controls and mitigations as you go. Crypto startups are particularly exposed given the nascent technology and the growing regulatory scrutiny in many jurisdictions.
Secure systems and end points: Crypto projects are often in the news for the wrong reasons; hacks in DeFi protocols, data leaks, private key losses for hot wallets, and more. These are real risks that every project should identify and establish proper security controls against. Verida set up an internal audit process early for all our employees to understand their systems and end points.
We established our baseline security controls around 2FA, hardware wallets, AV, and anti-malware software — all are a must. Once you’ve implemented these controls, keep reviewing your security posture and risk exposure to ensure you harden all systems and devices to prevent incidents.
Crypto startups are in the big blue ocean, creating new web3 markets with frontier technology. It’s exciting and risky at the same time, but a solid business operations foundation will help steer the team in the right direction.
I hope these tips are useful for those early-stage founders embarking on their crypto startup journey. The bottom line here is that you should strive to make your business operations hum so your dev team can keep shipping!