Crypto Winter: What’s Next for Startups | European Blockchain Convention

foreign hi everyone oh hi everyone and yeah welcome to the crypto winter and the after winter time for startups um welcome my name is Maria and I'm the founder and CEO of echo lens at echolands we train professionals to work in blockchain and we provide a platform for blockchain companies where they can hire this trained Professionals in positions such as developers Community managers content creators marketers so everything that blockchain startup needs or blockchain company needs and today I have investors and also startup Founders to discuss the current situation in the crypto Market we call it the crypto winter and what we can expect after the crypto winter and how the script to Winter is affecting really the startup world so I would like to ask my panelists to introduce themselves and yeah to tell us a little bit about what they do so hi everyone again I'm Susanna from and I'm the GP the general partner and co-founder of wedding Adventures which I bonded together with my partners Axel and zando they're also here if you want to wave uh over there hi yeah so um we are a venture capital fund that is focusing on startups at the intersection of web 3 and positive change so Founders that are using Technologies web 3 Technologies in particular blockchain to solve Global coordination problems that are responsible for some of our most pressing problems and this could be of course Financial inclusion on the one hand but also planetary crisis one prime example is of course climate change which has a very inefficient market for carbon emission trading right now so one of our investments is second is currently the the largest on-chain carbon Marketplace yes all right uh hi everyone my name is Mattis uh I am a co-founder of a startup called dairyverse at which we are building a decentralized exchange for Perpetual swaps on NFD floor prices um previously I spent two years at Outlaw Adventures sort of you know helping Founders design their token economies I help with 50 plus startups and before that I helped to set up a VC fund called rockawayx uh where we were early investors in in projects like Solana Oasis Labs so yeah so I've been around for five years and looking forward to the the discussion thank you yeah David great hi everyone my name is David So as you can see here I haven't founded anything yet and we are a venture capital uh company investing in the tech space so Tech space as a whole obviously blockchain is part of it um I guess that when you have this scope of tech you can definitely understand maybe deeper what's going in each sub-segment segment Etc I would say that on our side we try to do our best to identify the disruptors and blockchain is definitely one of them um and yeah I guess I can stop there and move to the questions thank you thank you everyone for introducing yourselves so because we're speaking about crypto winter here let's first discuss what were the reasons for the crypto winter and we can do like a analysis starting from the top what were the micro reasons for the crypto winter and what were the the macro reasons for the crypto winter so yeah I I would um basically put it in two boxes one of course the macro category and one is the crypto specific one I mean as everybody knows macro there are lots of effects coming together so of course a lot of post covert pain inflation the war against Ukraine more inflation fed policy and so on and all this uh of course um we're forming a lot of pressure uh and and at the same time coinciding with with crypto specific factors like the crypto Market cycle which is driven by Bitcoin having and also reinforced by a specific event that we all know yeah I would agree with you and I will add up on that uh basically uh during 2020 and 2021 we had a huge value creation that wasn't specifically had no let's say tangible behind it whereby people were Plumping their values their position by leveraging so a lot of platform was you know lending money and at the end of the day they didn't do any risk assessment or try to understand what is the collateral behind it and so just you know free money is there and that was also one of the impacts yeah and I would maybe add that you know in terms of some of the micro considerations um a couple of them negative things happened um for example you know the Terra Luna collapse which was basically caused uh which was you know it had its source um in in the macro environment you know um interest rates were Rising valuations were were coming down and you know simultaneously someone unstaked two billion dollars worth of USD from Anka sold it um that depict the uh the USD stable coin from the dollar uh and um you know as the price of Luna which is the token which was supposed to back up USD was going down um suddenly you know we realized that uh you know there was not enough Luna to support the price of USD and the whole thing just collapsed so you know like for some reason the token design of that project did not account for uh for an environment where where both USD and Luna were going down so so that that's one thing and then obviously you know the whole the whole FTX thing I mean enough has been said about that but I would maybe just add that uh you know from the regulation perspective on the one on the one hand you have an environment where anything could be a security and you could go to jail by you know um for for selling it uh but then on the other for you know somehow we're not able to to prevent I don't know how much eight billion dollars um you know going missing from your balance sheet so um so yeah so worsening macro poor token design choices uh and um um regulation and perhaps I would also add that there hasn't really been um real Innovation that would be able to spill over from crypto to the real world um yeah maybe I'll just pause there and yeah so I remember when the lunar crash happened I was at the conference so the first day of the conference the yeah it was everyone's happy everyone is like on a high note and then the lunar Crush happens and the next day everyone was so agitated and then people having crypto panels like speaking about crypto and the market conditions were like so confused they had to catch up what exactly happened and read like this reports that their teams were sending them to really understand what's going on it was such you know the the really the the whole mood was like so in the bottom of of everything it was really really interesting to see but yeah so now we have been in this cycle for a longer time and it's not the first winter right so we have experienced other crashes in the crypto space in the past and also like economical crisis so how do we compare this one to the previous ones and what we can what can we learn from past crisis and from this one um yeah I think the positive thing is that we know it's a cycle and so we know after the winter comes to Spring which is which is nice we by now we also know that um there's like a similar price development though depending on which cycle also on the different orders of magnitude we see similar behaviors we see what is for instance very typical that if you have a crypto winter good news tend to be ignored and if you have a bull run and bad news gets get to be ignored perhaps an exception today was in in the first half of 2021 when there was a stent in the bull market that was caused by the news on um on the crypto mining Crackdown in China and and and Tesla's stopping to accept Bitcoin there was perhaps a little bit of a exception but yeah that that we see every time yeah and then it would say if how does it compare to other Cycles perhaps I would draw a comparison to the.com Bubble uh and and there we saw similarly so it's also like a hype cycle technology hype cycle and very similarly we had a lot of inexperienced investors in an asset class coming in there it was just not digital asset it was the stock market so um yeah it was also quite comparable I think I will add just that I actually I would say that in 2020 17 till 20 2018 was more of a retail cycle whereby not a lot of institutional were there uh they were maybe talking about it trying to understand what is this beast but it came only later and so that's basically 2020 and 2021 which is more of a institutional one where there is a sort of fomo now all this governments are talking about it trying to implement it or not ban it uh there are also a lot of players that try to have it in their portfolio just to say yeah you know we have it but they don't understand it so there is some good effect to it uh in my opinion it's actually healthy what is happening so it takes out all the the scum and all the people that shouldn't be here yeah so in my experience um so back in 2019 we were trying to fundraise for this uh for this uh VC fund that I that I uh was helping set up uh we were raising 100 million dollars and it was virtually impossible uh basically the sentiment on the market um almost universally was that you know we're not even sure if if this is going to be around you know five years down the line and the main difference between the last bear market and this one is that you know almost almost everyone thinks that this is saying this is just another another kind of down cycle and if we you know if we if we build you know hard enough if we if we think about it hard enough um the next the next Bull Run is is coming you know if we actually manage to come up with something that's Innovative useful and actually positively impact um you know lives of many people um so so that's one one major difference uh and then of course nfts right like uh what nfts did um was that they they actually made crypto understandable for the general general population um like you know so um so I think the situation is very is very different and you can see that in the the sort of the um the price of the price of Bitcoin the price of Eve you know like how um how much down they they they went you know obviously it was very very different in the the bear Market of 2018 2019 and and this one um so yeah I'm much more much more optimistic in in in this one and much more sort of motivated to how to to build something because I know that um it's very likely to stay so David you just mentioned something that in your opinion it's good to have such Cycles you know also bearish cycles and can we maybe speak more about this topic why is it important to have both bullish cycles and Berry Cycles what's the benefit of this do you want to start um yeah so so I think it's it this discipline in general these hype Cycles uh on the one and they're of course yeah can be super painful they can they cause a lot of heartache because of course especially retail investors can lose a lot of money in in those in those Cycles um on the other hand they are super important for technology adoption because they are drawing so much attention I mean what is more interesting than rapidly Rising prices it draws like everyone's attention and it's it's incredible so you get it's a huge fomo exactly exactly so everybody's looking there you get a lot of attention so there's a lot of awareness of you know cryptocurrency for example or nfts and um and then people start to acquire some knowledge they read about it really trying to understand basically what it's all about they're also tend to collect first hand experience or with wallet and whatsoever and then also with that a lot of people a lot of talent is drawn into the market and and they basically they fall into the rabbit hole they start to work for these projects and then of course you have this situation when when there's this expectations are completely decoupling from reality there's a lot of overestimation of how fast adoption will go about and and so then at some point of course this this bubble bursts but when you look at the talent that is basically has entered the space they they tend to stay they don't they tend to stay true once they fall into the rabbit hole to the technology and and they continue to tend to continue to work there perhaps not for the same employer always but they are there are ideas their their Innovation um their their entrepreneurship they they contributed massively to the next cycle yeah yeah no I agree with that maybe I would add that um I just I just view Cycles as a a surprise Discovery process right because we know we come up with something new uh and and we have like very little idea why it's useful what can we use it for and obviously you know expectations are are blown up because you know we are greedy um then we we realized that actually you know we can't use it that much um so you know the prices go down because we we are fearful um but then then you know if enough enough time passes and you know and enough enough work um has been done um I think I think you know the price is stabilized and and so so I think I think gradually these these Bell um bull bear Market um Cycles will be much more much more smooth and whether they're good or bad I mean they just they just are they're normal yeah well actually I agree with that there are some for some that are good and for others are pretty bad um but uh there is a small story that uh the the co-founder of Leon always uh tells me and I kind of like it so we'll share it with you guys um Hypes uh basically it's like you imagine yourself you take your small boat you go on the ocean right and when you're there eventually you start to understand that there are holes and you see water getting in and you're like oh I need to fix this and that's pretty much the High Pipe makes you understand that there are problems and then you fix them so you can come stronger and continue your journey so it's analogy so let's let's what from investors point of view are Fields right now in the crypto space that are still attractive because we know that investors are a bit hesitant right now to to invest in companies and yeah business ideas so what are fields that are still attractive for investors I'm not an investor so I'll leave it to you guys thanks um yeah so I would say in at this point in time where it's really hard still very hard to access capital it's in those areas where the projects don't only have to rely on you know the typical crypto investors and um so yeah and I mean in the previous Cycles you know the killer application that have emerged they mostly were growing you know within the crypto bubble they were basically fed in at least in the beginning from funds within the crypto Bible cryptocurrencies D5 nfts but now we're seeing and at this moment there is already a spring happening of projects that are accessing also other funds and these are these are teams that are solving real world problems and for me the killer application that I clearly see is a regenerative Finance it's this is also obviously basically what we believe in because we'll be based our fund on this thesis so the intersection between web 3 and climate for instance or other positive change areas and so we see of course there's lots of investors out there who have understood the urgency of our of our planetary crisis and so there is more and more funds available for these kind of projects to thrive and and so I think we are really approaching an inflection point here so I I agree but at the same time I disagree with the the refi as it is today uh for me it brings me back to those moments where everyone was talking about ESG uh you know like sustainability impact and it was more like of a green washing which is not your case because we discussed about it and uh it's actually great to see that there are pioneers that comes in and provide what is missing today um in the market so some players will manage definitely like you or others to to let's say push refi up there today for some reason I would take my focus a bit somewhere else I would say um eventually on the Capital Market development but like options of staking I know it's tough I go straight to that one um another topic that is also very interesting for us uh is cross chain Bridges basically to understand you know how we can work together that's going to be probably huge at least we believe in that and um the last one will be all the different layers so they are two eventually that provides services but that's our view so I I've been talking to um a lot of investors in the past in the past you know months uh and based on what they what they told me um it seems to be sort of yeah like structured around well yeah refi is is one one one week um one big topic but there's also stuff like under collateralized uh lending in defy then there is um you know decentralized infrastructure and relevant Hardware so you know as opposed to as opposed to using Services of telcos uh you know why not why not having your own piece of Hardware which you can use for Wi-Fi uh and you know other other purposes um then also you know liquid staking seems to be you know something that they are they are they are interested in um and yeah and then then there are problems like you know no one knows how to do taxes and and you know it's impossible to to you know go over 3000 transactions that you that you that you did so you know that's some that's also something that they that they that they want to see um and and then I I don't know I feel like I feel like the current setup that we have with ethereum um you know solidity um and there are just so many holes when it comes to security that I think we need we need something better in order to make to make um to make D5 more robust um and and you know a couple of examples how this is being being done is uh you know projects like Aptos and sui um which are using the move programming language which is some supposedly more safe when it comes to this um so so yeah so I'm just wondering guys like what do you what do you think about this like is this something that you are that you are looking at or so not specifically because we have this refi Focus but it's all I mean basically all what you were mentioning it's uh will be very important infrastructure that we will also be using from the refi space so um yeah so I I definitely agree with the areas as well all right so Susanna mentioned that there's a spring coming and let's talk about something positive right because we were speaking about the crypto winter so what comes after the winter and like what are the steps we will take in order to overcome it in order to come to the next phase I will start on that one uh basically regulation guys uh I know it's not a good news but it is um I guess that you know every time that something happened big FTX Etc then people start to look at the industry like in a deeper way um just out of curiosity how many people here are more concerned about the starter part could you raise your hand if you have a startup or planning on okay okay so we have to be careful what we're seeing uh yeah but basically your regulation that would be definitely something to look at um eventually what's gonna happen in my opinion is that we will go into more sophisticated Services capacity the industry itself is building uh it's building itself actually and for that you will have a higher requirement even for us when we look at investment probably we're going to talk about it later but we want to make sure that people are solid strong enough to sustain what might or might not happen yeah I would I totally agree and I would add um definitely also professionalism I would put it because I've there's lots of standards that have developed over a long time in other areas also in web 2 that are now coming to web 3 and just making the whole for instance application security and all this and making the whole space that's why probably Maria can talk about uh Echo lens yeah so uh what we do at Echo lens actually is uh I wouldn't call it refi but it's something very important I think uh it's a use case that for me cryptocurrencies were made for and this is the financial inclusion so we have people from emerging economies and I have someone here from my team that came from Nigeria and uh we have a very urgent problem here because people from Nigeria right now for example do not have access to cash which I was really shocked about and if you come to the EU with a few dollars because you don't have access to cash and you cannot exchange this money because exchange offices have a minimum amount to exchange what do you do right so for me this is something that crypto can help with and this is so urgent to implement so for me the next step in order to overcome the winter will be also access to crypto payment services and like we have to make Financial inclusion more present and it has to really be on the top of the agenda in my opinion then this is crypto is predestined to do that so yeah this is my opinion what's really important because also regulation of course is a big part of that and I had a conversation earlier with with someone saying that due to regulation of course a lot of companies will cease to exist because they were not made to be regulated and their business models do not function well with regulation or regulation will make their services more expensive so probably this will also come to another wave of yeah crypto companies uh you know disappearing but then more stable more um yeah more sustainable businesses will appear in the market so guys um let's now talk about this um also the investor side of like how investors are reacting to to the crypto winter and like what do investors actually want to see in order to invest right now so it matters are you listening to Suzanne uh oh yeah I'll I'll be making mental notes okay so so what I what I observe right now when you say how investors are reacting to um the crypto winter and this is not true for for basically other areas I was I was describing where we have some spring already like refi um is there's still a lot of inertia in the sense you know some hurt behavior that there's really still some reluctance to invest because others don't invest I mean which is to some extent understandable because you cannot alone in the you know they tend to not to be able to sustain one startup just by yourself you're also reliant on other investors so that's what I see that is still happening what do we want to see in startups before we invest um yeah a lot of things but since we invest more you know proceed stage uh of course the the main part is the team the team the team and um here the the yeah the kind of things we want to see in in a team so uh one factor definitely is resilience is a grid for assistance this is one one one part then um we want to see definitely some agility the agility in in the basically you're on your way to product Market fit and you have to be super super responsive to feedback um so basically feedback of your customers or your potential customers the feedback of your investors and then pivot pivot pivot pivot even if it's if it's just you know very very little changes that you're making but but this is something which is super important because you have to be super agile and the third part I would say is you have your ability to hustle and your ability to communicate especially because we are in a market with a lot of complex products and it's it's kind of not it's an art to really break it down to to to make it you know easy to understand for everyone so if we see this uh yeah we're very much like that yeah I I follow exactly what you're saying I would also add on top of it uh I mean the team obviously but a product fit uh guys if there is a need out there go and fill it because obviously then you will have people willing to to buy from you and that's I would say a very important uh element you talked you talked about resilience I like to say also stability uh you know if you start something make sure that the people that are with you are committed to to it convinced by the idea but also committed so be more generous share with them Etc and and one thing and that's more maybe I'm uh uh yeah a piece of advice if I might say to all the the startups here please stop saying uh yeah we want smart money like if there is Money Take the Money be smart take it bring smart people like it makes more sense you can find advisors people that are committed that that are willing to give even volunteer like time to help but take the money like literally that's my piece of advice it's interesting what you're saying because I've been hearing this with the smart money a lot um so maybe like a follow-up question towards that um what are like how can a startup convince an investor right now to to invest and develop develop like a relationship with the investor that well let's not call it a smart money but have a relationship Beyond just a financial relationship because for a lot of startups you know they need connections they need advice as you said and of course saying fine advisors yeah find advisors but a lot of startups are also wishing additional support from their investors and looking for investors that can help them in the field of work that they are in so a lot of the founders you know there are 20 something 30 something maybe don't they don't have extensive experience an extensive relationships and they're hoping for that kind of investors so how do you yeah get an investor like that how do you develop a relationship where you get Beyond financial support so so I would say that first of all where I was quite surprised coming from more the traditional space Financial traditional space uh what I discovered with all the ecosystem is that people are more willing to share in blockchain giving contact helping each other so that's great and that's something we should definitely keep up with now how to attract I would say that first of all keep your feet on the ground uh don't oversell it sell it obviously we're all cells here so sell it but sell it smart don't be like over pumping whatsoever be pragmatic in your approach make sure that people you know are listening to you and they're looking at you know a very simple example when when for instance we look at the balance sheet if I look at the CEO salary and he's higher than his CTO I would say like okay the guy doesn't believe in he's basically his product project or whatsoever so those are details that we look at and we say okay the guy is not committed he's just here to do money and then you know go away so that would be also what I would say personally that could help yeah and definitely listen listen listen and then kind of process uh what what is being said to you by by the universal and then in the next conversation show basically that you understood it um we have actually a very cool example um just recently of a startup which which we like we very much like the team we like the general concept that was on the education space and but we didn't like kind of like the narrow Market segment and we also saw that there was some some issue with scaling the solution and we gave this feedback and then a few weeks later they came back to us um they had changed their name they were addressing a much wider segment and what they have had done they they basically integrated AI to automate in in that case it was course creation that completely helped them scale the product so we were very impressed by that and yeah something like this is definitely a good basis to continue thank you so much everyone for your contributions and for answering the questions and thank you uh everyone for being here and listening thank you thank [Applause]