Qiao Wang How to Become an Excellent Cryptocurrency Founder?

Qiao Wang The Ultimate Guide to Becoming an Exceptional Cryptocurrency Founder

To become an excellent crypto founder, you need to have outstanding insight and independent thinking, not just rely on reading articles. Jackson created Thunder to give non-privileged entrepreneurs the chance to succeed, instead of only the elite. The three elements mentioned by Buffett: honesty, wisdom, and vitality, are the key points we focus on, and these qualities may take years to cultivate, or even be innate.

Original title: What does it take to be a good crypto founder?
Original author: Qiao Wang
Original source: medium
Translation: Kate

I often hear this question from founders and venture capitalists: “What criteria do you use to select teams for AllianceDAO?” So I decided to write down my thoughts.

But as I was writing this article, I realized that it’s not just something we’re looking for in the teams applying for our project, but what it takes to be a good crypto founder. The difference between “what we’re looking for” and “what it takes” is that the former is just an assumption, while the latter is based on empirical evidence.

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I don’t claim to know the perfect answer to this question, but over the past three years, we have accelerated the development of 200 startups, and some patterns have emerged.

Insight

First, I provide potential applicants with an actionable alpha. One of the most important questions on our application form is “What unique insights do you have about your users?” From what I know, having outstanding insight is one of the key factors that differentiate excellent from bad crypto founders. However, few applicants can provide a well-thought-out answer to this question.

Profound insight into users is often the foundation on which an entire company is built. For example, the initial idea behind Tensor was that despite the dominance of OpenSea and Magic Eden, there was still an important user group: professional NFT traders. These professional traders need different tools such as scanning or advanced analysis. This is similar to the world of fungible tokens, where professional traders need tools like perps or new ERC20 snipers. Tensor’s entire product vision is to serve these professional traders.

But great insight doesn’t have to be that. It can also be an unexpected observation that makes us (the interviewers) say, “Wow, I hadn’t thought of that before, but it makes sense.” An example of this is when a member of StepN (ALL7) told us during an interview, “Many people go to the gym not because they need a coach or equipment, but because they need real engagement to hold them accountable.” The fact is, we screen thousands of applications every year, and there are very few things we haven’t heard of. Being able to teach us something new tells us that a founder can think independently, rather than just joining the cryptocurrency industry after reading some “Why Web3 is important” articles on the internet.

Sometimes, great insights come from completely thinking in reverse. When Ostium (ALL9) first approached us, they were pitching us “Commodity RWA”. “RWA” as a category hardly existed at the time – no tokenized government bond projects had any real appeal – let alone “Commodity RWA”. So, I countered, saying, “No one in the cryptocurrency space cares about gold and oil. They are asset classes of the baby boomer generation.” Kaledora countered with, “r/wallstreetbet is obsessed with lean hogs and orange juice because they are highly memetic, and there isn’t an easy way for retail to lever up on them.” I don’t know if putting commodities on-chain has a lot of potential, but I do appreciate this reverse observation.

Now, you might say, these insights seem irrelevant, and they could even be proven completely wrong. Yes, but having insights in itself isn’t the reason founders might succeed. Instead, having insightful founders includes two critically important qualities.

First, I want to paraphrase Tensor’s Ilja, “If you don’t think in reverse, you don’t have a startup.” It’s not just investors who have to bet against the trend. Founders must do so as well. In fact, when are the last times that ultimately successful crypto startups didn’t have any controversy initially? Do you remember how many people scoffed at Solana? Do you remember the CLOB vs. AMM debates around Uniswap? Almost by definition, starting a company is about finding a secret that other people don’t know or very few people acknowledge. Otherwise, the company might already exist.

The second trait of being insightful is founders spending a considerable amount of time in their domain, demonstrating persistence, true passion, or a combination of both. I’ve written about this before, but I find that newcomers to crypto usually need at least 1 to 2 years to form genuine insights. But why does it take so long? Well, I suspect it’s because crypto is so counterintuitive, so different from where most founders come from – Web2 or TradFi. Many times, founders give up on crypto before the critical moment arrives, within less than 1 or 2 years. This brings me to my next point.

Elite schools or elite companies?

Let me use a data nerd to explain. If you take founders in the crypto space as your sample, you’ll find a correlation between attending elite schools or working at elite Silicon Valley companies and their future success. But if you take a sub-sample of the top 1% (which is the threshold to enter AllianceDAO), the correlation is almost zero. When I look at our most successful incubated companies and the most successful crypto companies, few come from elite backgrounds.

It should be clarified that a correlation of zero doesn’t mean that an elite education presages failure. Not at all. It simply means that, at the highest level, it is no longer an independent predictor of success. But why is that?

Some founders have been taught from a young age that they must grow by 5% every week or else they will fail. However, the reality is that the growth trajectory of cryptocurrency products is rarely smooth sailing. Instead, most products, from centralized ones like Coinbase to protocols like Ethereum, experience growth in a step-by-step manner. This is mainly due to the cyclical nature of the overall market. As a result, these founders often give up too quickly and almost always during the bear market when growth stalls.

Another reason is that many founders from elite backgrounds enter the crypto industry for the wrong reasons. They choose the crypto field because of the influential people they follow on Twitter who exaggerated Web3 as the future of the internet at the peak of the bull market and fell into the trap of thinking that price increases confirmed these claims from their own experiences. If you are an immigrant from the lower class, all you want is to make life-changing money with Harry Potter or to send remittances to your family, these claims sound ridiculous. Now, I do believe that Web3 will become an integral part of the internet, but before joining a startup, you must be able to start from first principles, deduce why this would be the case, and immerse yourself in existing crypto products to fully appreciate the power of crypto.

One direct consequence of Web2 or TradFi senior elites entering the crypto space for the wrong reasons is that they often indulge in ideas of “decentralized Uber” and the like. I know the term is now overused to an annoying extent, but it is apparent that just because something works in Web2 or TradFi doesn’t mean it will work on the blockchain. When I interview applicants, I often ask myself or them, “What novel, weird, or even controversial consumer behavior does their product bring about?” Even a non-genius can realize that decentralization tends to make the user experience worse, but if a product can enable new behaviors that consumers have never experienced before, that may be acceptable. If it doesn’t enable new behavior, then it’s just competing with existing Web2 or TradFi companies with worse user experiences. An example of novel behavior is in DeFi, where you can easily use hundreds of financial products from a single account without creating new accounts or going through KYC for each new product.

We have a question on our application form that I am particularly interested in: “Why did you choose to study this idea?” Solving your own problem or that of your friends may be a good answer. Interestingly, this answer often comes from founders in emerging markets or DeFi degens, who are the opposite of what I consider “elite.” For example, Felipe built Kravata (ALL12) because he needed a Latin American fiat off-ramp for remittances. Jackson built Thunder (ALL12) because he despised how difficult it was to mimic new ERC20s and Friendtech keys.

The key is, if cryptocurrency is really the long-term equalizer for the 8 billion people on Earth, then logically, it must also be the equalizer for the founders of cryptocurrencies. In other words, entrepreneurs without privilege should have the same chance of success as the elites. This is because they inherently understand the same non-privileged users.

For these reasons, we rarely care about elite qualifications. We truly don’t. About two-thirds of our applicants are not obtained through enthusiastic introductions or recommendations. They are complete strangers online who put a lot of effort into applying and interviewing. Many venture capitalists believe that enthusiastic introductions are necessary because your ability to enter the venture capital community is your first test: if you can’t even get enthusiastic introductions, you won’t get users. I agree with this view, but I also believe that for entrepreneurs in the world without privilege, their distance to elite venture capital is not 1 or 2 degrees, and their better use of time is to connect with users rather than venture capitalists.

Perseverance

Although elite qualifications are not necessarily a good indicator of first principles thinking, they are a good indicator of perseverance. Many people, including myself, believe that perseverance is the common denominator of successful founders in any industry.

In our application, we ask applicants to describe a particularly persistent example. But to be fair, it is difficult to accurately judge the founder’s perseverance based solely on this question or during the interview process. Occasionally, they will tell us some surprising things. One of our alumni (anonymous for privacy reasons) told me, “All my classmates from (a top university) have achieved great success in the field of artificial intelligence. If they can do it, so can I.” I felt their enthusiasm.

Now, many people would say that money and fame are not good reasons for entrepreneurship. I’m not sure if that’s true. But setting aside this argument, the most persevering people I know all have a lot of pressure. Regardless of how much success they have achieved, they always seem to have something to prove. Many have experienced early traumas. It is well known that Musk and Jobs were raised by abusive fathers.

But in the cryptocurrency industry, perseverance is even more important than in other industries, and this makes sense. Take another industry that goes through a complete cycle of prosperity and recession every four years. Or another industry where the mission of the SEC chairman is to eradicate it. Or another industry where all the main players end up in jail in less than a year. Whenever I see tweets like “I aged 3 years in the past 24 hours” or “I survived the bear market of 2022.11.20,” I laugh. This is not an industry for the faint-hearted.

A simple but not easy way to increase perseverance is to find a partner you know well, preferably someone you have worked with before. We also ask applicants on the application form how they met their co-founder. Having co-founders is not only about complementing each other’s skills, but also about providing each other with psychological support during difficult times. The problem is, working with someone you just met at a conference rarely works, this person must be someone you have already established a trust relationship with. Many founding teams have disbanded during bear markets. They claim it is due to differing opinions, but upon closer inspection, it is actually due to a lack of trust. If you can’t find someone you trust, it’s best to go solo (you can also rely on founder communities like AllianceDAO for peer support).

Honesty

Warren Buffett said it best: “The qualities I look for are honesty, wisdom, and energy. If you don’t have the first one, the other two will kill you.” In fact, in the past year, all the main characters who ended up in prison had the last two qualities but lacked the first one. I don’t think the word “integrity” needs any further explanation.

But coincidentally, these three elements of honesty, wisdom, and energy align perfectly with all the attributes I have discussed above. Insight is related to wisdom, perseverance is related to energy, and the lack of privileged backgrounds may encompass both.

Aside from these, we certainly also care about distribution, market size, engineering capabilities, defense capabilities, regulatory risks, and so on. However, a weakness in any of these areas does not necessarily ruin the deal. We often collaborate with insightful, underprivileged founders who are persistent and honest, helping them grow. These qualities may require years of cultivation or even be innate, which is why they are undeniable. All other elements can be learned or acquired.All common mistakes can be avoided.

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