“Ideas don’t make you rich. Ideas get executed right” – Felix Dennis
Your investment strategy has weaknesses.
You invest in projects because you fall in love with the vision. Have you spent enough time thinking about whether the team can execute on this vision?
Theranos had an amazing vision for its “blood testing technology,” but it ended up being a lie. The same is true in the cryptocurrency space.
Constant procrastination, accompanied by broken promises. Projects stopped updating their Github and communication stopped. You and everyone else in Discord are still having fantasies.
It’s easy to hype a project. You should ask yourself: “How can I know if this team is actually executing on their vision?”
I have also done some angel investing in the past. At least I could meet the founder himself. I can ask about their plans and get a sense of their knowledge base. I know they can’t disappear with my money due to the law.
Crypto is different.
It’s like poker and StarCraft – we make tough decisions with limited information. Teams can hype, raise money, and disappear with millions.
And reading this article will help you better evaluate projects based on their ability to execute.
1. Implementation challenges
Running a business is harder than you might think. I’ve run several companies before, and sometimes it’s hell. YouTubers and “entrepreneurs” on Instagram don’t show a real picture.
I remember panicking because I wasn’t sure how to pay my next paycheck. Or ruin my product because of Amazon’s decision and lose a huge percentage of my sales.
Crypto is a bloodbath of full competition without any rules. Code and functionality can easily be stolen (mocked). Whales are always looking for easy prey. Few people are up to the stage.
Here are some of the challenges the team experienced:
1. Lack of experience .
Experience isn’t everything, but it helps. There are now 19-year-olds managing million-dollar deals. Some of them have never even worked before! Much of running a business is people-centric. It takes years to develop the emotional intelligence needed to manage and communicate.
2. Novelty Object Syndrome .
For a founder with a vision and an idea, it can be tempting to start a new project. But not everyone can run as many companies as Elon Musk. So instead of being 100% focused on the project you are investing in, they start to distract themselves.
3. Unstable external environment .
It’s a bit like a video game, with new opponents appearing every day: your new features are copied, your partners are robbed, the price of coins drops, etc. Even Russia invades Ukraine and everyone is complaining about the price. You have to be vigilant.
4. The gap between founders and CEOs .
Someone might be a Gigabrain developer (with a solid understanding of crypto industry concepts) but not capable of running a big company. This is why many founders in Silicon Valley are replaced by more experienced CEOs. Founders/CEOS like Mark Zuckerberg are the exception, not the norm. Research how venture capital firms invest. Ideas are important, but founder evaluations are even more important.
This is what legendary venture capitalist Paul Graham looks for in founders.
Second, what should be paid attention to before starting
You’re interested in a project, but it hasn’t started yet. Although it has the greatest potential for return on investment, it also comes with the greatest risk. Here are some clues to look for to see if this team is capable:
1. What has the team accomplished?
Study founders and see what they have accomplished before. Here’s an impressive example:
Pictured below is Stephen Tse of Harmony one, who has a PhD in cryptography from UPENN. Worked at Google and Apple. Started a company and sold it to Apple.
Does this guarantee Stephen will be successful in the cryptocurrency space? No, but it will give him more favorable opportunities. That’s why some of us get so excited when we see “there are ex-Googlers on the team.”
Evaluating a public founder is easy. What happens if the team and founders are anonymous?
I want to see if these anonymous teams have launched anything before.
I love Hundred.Finance. Even though vFat is anonymous, he and his team have a track record of developing vFat tools.
Most projects should be audited before launching. Go read the report: Are there any red warnings? Has the team addressed and fixed these issues?
3. Who else is involved in the investment?
It’s easy to hate the pros, after all, they get their chips before you, and they’ve gotten into the habit of selling. But VCs have a big advantage – they can do some due diligence that you can’t .
I invested in Platypus.finance when it first launched. I don’t know who the founder Duckbill was, but Avalabs did fund them. This leads me to believe that the founders and team are qualified.
4. View documentation/code/website .
How you do one thing shows how you do everything else. So, to see if the project is all copy and paste work? Are there typos everywhere?
5. Are they clearly communicating their vision?
The roadmap shows the responsibilities they are willing to take. It also gave me clues on how they think strategically.
3. What should be paid attention to after startup
When the agreement was launched, we started to get more clues about the delivery of the team
1. Is the team delivering what they say they do?
Have they reached their milestones? In this way, it seems to be firmly implemented according to the roadmap.
2. What is the quality of the work?
The team has delivered features. Is it buggy? In early 2021, I am a big fan of Pancakeswap. But then I closed my position because the “forecast” and “lottery” features were worse than McDonald’s ice cream machines.
Pancakeswap forked code from Uniswap. “Prediction” and “Lottery” are their first unique features. I saw that they couldn’t perform these simple functions and it made me lose confidence in the project.
Expectation and Reality – Seller Show and Buyer Show
3. How do they deal with setbacks?
Problems are normal in the DeFi world. What matters to me is how the team responds to them.
Does the team have control? Is there a clear plan going forward? Or just blame “FUD” and consider yourself a victim?
What I want to see is professionalism, not an emotional response.
Sometimes they will keep silent and say they are busy with construction (the project side is doing things). It only takes a few minutes to write a tweet. Maybe they’re messing around on the beach on Bora Bora Island with your money.
5. How do founders spend their time?
Some people can’t handle success. Imagine what it’s like to be thrust into the spotlight. You now have more money than you ever dreamed of, and you have a group of people who admire you.
In the e-commerce space, I see this happening a lot. After everyone reaches an initial level of success, instead of continuing to build, they want to enjoy the fruits of their labor.
Enjoying vacations has become more important than running projects. Or founders like making YouTube videos more than building.
6. Keep moving forward.
A critical turning point occurs. When a team changes strategy every few weeks, it should be a red flag. They try to present a (not-so-credible) point of view to others and hope they will believe it.
Here’s a clue to a failed project. Go look over your investments and see if you can spot any warning signs.
Here are some clues:
- Constantly procrastinating while building a website.
- Users are banned for criticism.
- Everything is identified as FUD (spreading negative news to make investors feel scared and uncertain, trying to influence the market)
- GITHUB has stopped updating.
- Founder’s Emotional Response
- Unprofessional tweets about female founders
4. Become a better executor
I know some project parties and founders are reading this. I don’t have all the answers, but here are some that worked for me.
1. Use the right people.
Don’t try to do everything yourself. You don’t have time. Learn to trust and manage people with the right advisors and team members.
2. Implement a management framework.
Think of them as the operating systems that run your company. For example: [OKR’s], [Traction] and [Scaling Up].
3. Be honest.
You will make mistakes at some point. As long as you are honest, people will be more forgiving than you can imagine. You should be transparent with your investors. The first step out of a hole is to stop digging (the first step out of a hole is to stop lying, stop hiding).
4. Numbers don’t lie.
Every goal should have a key measurable metric that lets you know if you’re heading in the right direction. How do you measure growth? TVL volume. How do you measure adoption? The number of daily active users.
You can’t do everything you want. It’s a bit like playing chess. You have many options, but you have to figure out the best course of action.
5. Execution is a skill you can improve
Crypto evangelists tend to emphasize only their victories. What about their loss?
My “reputation” comes from reporting on the “Wonderland” project. When Sifu’s identity was revealed, I quit. I spent a lot of time reflecting on this investment and trying to learn from it.
This project appealed to me for two reasons:
- I fell in love with this vision.
- I’ve seen how well investment firms like a16z and Blackrock are doing. So, when I see “mechanism readjustment + high mining income + investment in GameFi”, it makes a lot of sense to me.
- Dani has experience .
- He’s the hottest developer in DeFi, Frog Nation isn’t lost (Dani’s followers still exist)
- If you look at Wonderland from the screening criteria given in this article, what are the red lines for execution?
- The team has never updated the help documentation.
- Wonderland is becoming an investment fund, but the help document says it’s a token.
- Constant procrastination. “When will the airdrop” become a MEME
- Audit issues at Paladin were never resolved.
Audit Results of Wonderland and Paladin Security
- constant change . It felt like everything they were doing was abnormal.
- Lack of transparency. There is no roadmap. The treasury has not been audited.
- Dani has a new project every month. There should have been a meme about Solana. He is rolling out ve(3,3) with Andre. He became the leader of Sushi. All of these are outside of Abracadabra, Popsicle Finance and Wonderland.
- Communication is bad. The community asked them to hire a community manager to clean things up. But their answer: “We help Frog Nation with as little expense as possible”. It doesn’t make sense when the company is worth $1 billion.
- My spider sense (a keen perception system) is out of order and I’m not taking action.
- Here are some of the reasons:
- Authority bias. Dani has an amazing track record. Abradacabra did well and Popsicle Finance recovered with his help.
- social prejudice. Everyone in the industry is vouching for Dani. Tetranode and Dani work closely together. Andre Croje rolls out ve (3,3) with Dani. Even the entire Sushiswap community voted for him to be the leader.
- Sympathy for bad developers. I have a whole bunch of experience working with bad developers. Why is everything being delayed? slow developer. I can relate to my past.
In hindsight , I made an exception to my own standard.
It’s a bit like dating someone who is super sexy – you know it’s not normal for them to text you 10 times a day, but you ignore that because they’re so sexy. Next thing you know you have to file a restraining order because they are mentally ill.
I know it’s easy to blame Dani and Sifu for the investment going downhill, but it’s not productive. Ask yourself, what are you in control of? What can you do better?
In my case, I’m creating a set of standards. Among these standards, there are some principled standards. If a project violates principled standards, then I quit.
As an investor, you can never be 100% successful. If an investment doesn’t work out, take the time to reflect and understand the lessons.
6. Where to go
Remember, this is a game with asymmetric information. You have to make the best decision you can without knowing all the facts before considering the stakes.
I hope you will reconsider your investment. How many of them failed because the team didn’t deliver. In hindsight, did you spot any warning signs or red flags?
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/how-to-evaluate-crypto-project-prospects-based-on-team-capabilities/
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