After the hackathon: raising, founding, building with Daniel Chong

Can you guys hear me? Okay, cool. Hello everybody. This is going to be about how to raise money after you do your hackathon. Um about about me, I'm Daniel.

Um, I work at a crypto startup. We work on crypto security. Um, I won the ETH Denver hackathon last year with my co-founder over there. So, uh, that's something pretty cool. Uh, and after the hackathon, we ended on to raise money.

Um, and in this short presentation, I'll talk about how we ended up doing that, how we incorporated, how we got customers. Um, because a lot of people build hackathon projects just for fun. Um, and you know, they are fun things. We built it for fun, but uh there's a lot of value that you can get out of just um kind of going all in and figuring out what to do. So, I'm Daniel.

Um I left school like a year and a half ago uh to work in crypto, I guess, like full-time. So, I'm one of those bull market zero interest rate people. Um but, you know, it ended out all right. Um Noah and I was my co-founder over there. We went to the ETH Denver hackathon last year.

This is us with Mr. Vitalik. We had a little debate on stage about me and stuff like that. Um, and I would say like this hackathon was probably the best thing that could have ever happened to to us. Um, I didn't really know anybody to be honest with you.

Um, I had no recognition. I didn't know what I was doing. Um, I I knew how to code, but you can't just know how to code. You need to have credentials. You need to be seen.

Um, and it really got us on stage. Um, so I guess about what our hackathon project was about. Um, we were stopping like theft with MEV and stuff like that. Um, and it was a project that we came up with after like two hours, three hours. Uh, actually like I was 20 at the time.

I couldn't get into a bar. So, it was like 2 a.m. and the hackathon was due at 6 and I was like, "Okay, [ __ ] yeah. Sorry for the language.

Sorry for the language. Okay, screw it. I'm gonna go and hack at the hackathon." So, we just stayed up all night. We coded this thing.

We presented it. Um the the demo was like mostly just like a PowerPoint presentation with some code attached and yeah we ended up like getting pretty far and I would say like the the biggest thing that I learned from that is like you could just send it and even if it doesn't work like what was the worst that was going to happen like we would have been you know maybe embarrassed on stage but no one really remembers those things after like six months. Um and even then like the fact that we were even on stage was a was a super cool thing for us. So anyways, enough about the hackathon. I guess how do you start raising money um and stuff like that?

So we raised five million from like companies like Dragonfly, Coinbase, OpenC, um other cool people like that. Um and I would say when it comes to raising money, there's a lot of myths. There's a lot of things that you hear. Um and I I think a lot of the stuff online is like really stupid. And in this presentation, I just kind of want to dumb it down and make sure that you guys are getting kind of the alpha on fundraising and founding companies and stuff like that.

So, I think one myth that is like so prevalent is that you need money to start a company. Uh you don't need money to start a company. So, I was talking to some well I I heard about a conversation earlier from a couple founders that are like we are building fractionalized real estate on chain. we need money to do this because we can't buy le we need a lawyer essentially. Um and I said why do you need a lawyer?

Why do you need any of that? Just build a thing that gives some kind of proof of concept. Like you don't need to start by fractionalizing houses. You could start by selling a painting from a local artist. You can start by pre providing value and kind of showing a story of what your tech or what your product can eventually be.

So you don't need money to be to build anything useful. Um, and that kind of ties into like creating a story. So, when we were at the EP Denver hackathon, uh, the there was no like there was a big narrative about like security and me. And I think the weird reason that we were able to like create that success is because um, we kind of tied our story and our company and our product and our code into an existing narrative and then sell that narrative. uh you know you're raising from VCs that give you millions of dollars pre sometimes pre-product sometimes postp productduct pre-revenue most of the times postproduct pre-revenue they're making big bets and they want to understand why they should be making that bet on you and you know there there's like things like oh like you should be making like 10,000 ARR before we give you you know a million dollars or stuff like that but at the early stages when you're just hacking um people see like when you win a hackathon When you participate in a hackathon, when you get awards, when you get bounties, people see you as alpha, uh, and when for like the people that are not crypto pill here, like alpha is like, oh, like you have knowledge that other people in the space don't understand.

Uh, so they see you as someone with alpha, they have like kind of a a respect for you. So if you can tie that into a story that makes sense for them and can show that there's a huge market for the product or the service that you're building, uh, that's the thing that really sells. So, for example, at Heartbean onchain firewall, we stop people from losing money to like hack, scans, and theft. The way that we raise that is, you know, crypto is getting bigger, the market is getting bigger. Um, theft hasn't theft has evolved as an industry, you know, being funded by like big countries like North Korea and stuff like that.

But the security industry hasn't really evolved since hardware wallets. Um, and moving with that narrative, we were able to, you know, raise and sell essentially selling to VCs this idea that, hey, we're going to be a multi-billion dollar company because we see a future that you might not or we see the same future that you do, but we have a solution that you guys need in order to get that done. Uh, so how do you create that story? How do you sell that story? Um, I would say the number one thing is to get customers, is to get proof.

You can't just hack something, code something, and then call it a day and say, "This is a wonderful idea. I'm gonna make it, and I'm gonna sell it, and I'm gonna make so much money." 99% of every like, no, I think 100% of all your ideas will fail. It's just a guarantee. Until you keep iterating and keep iterating, you're going to find that one idea that ends up taking off.

And even when you do find that idea, it's going to take off really slowly. Um, and the way that you kind of find out if something is a good idea or not is not by asking your mom or asking your friends, hey, is this a good idea? You sell it to people. You say, pay me this amount of money for this value that I'm creating. And that's the the clearest way that like a venture capitalist or even like your friends and family would need to see um in order to raise money from them.

So, I guess in summary, I don't think fundraising is something super complicated, but when it comes to like the politicking and like the networking, those are things that happen naturally if you have merit. Um, merit being like if you have customers, if you have valuable products, if you can tie your story into a narrative that's way more popular than you are. Uh, those are things that make your fundraising journey a lot easier. I don't think that fundraising needs to be about reading books about fundraising about um you know talking to VC smoozing with them getting coffee because at the end of the day if you have a product that is okay well I guess the slides are not showing up on the screen but that's okay. Um if you're not showing if as long as you can show that you have a story that's worth telling customers that are buying your product um it it really is kind of something that will happen.

Uh, and I would say like my final piece of advice is to not be a pushover. Um, a lot of VCs kind of thrive on like in inexperience. Um, you can get deals that might not work for you. You might get valuations that might not work. Um, you know, the average deal one year ago was 4.

5 million at like a $30 million valuation for the company. But if you didn't know that or if you didn't know those numbers off the top of your head, they could be giving you four mil for 15. it could be giving you four mil for 10. Um, which is still a lot of money, but there's there's things to know there. So, when it comes to like not being a pushover, I would say get if you start raising um first of all, make like $10,000 off a hackathon.

It took us like two years, like a year to do that. Like make make money off a hackathon or use your savings or something like that and hire a good lawyer. Uh, and just raise the funds. Make sure you're talking to your lawyer and stuff like that. I it's ridiculous to me how many people I hear horror stories from like, "Oh, I didn't get a lawyer for my startup financing or I use like a like a $200 an hour lawyer."

It's like, "No, you got to spend like for your first funding round, you should expect to spend like $8,000 to $9,000 on your first round of funding for legal fees." So, I guess overall, um there's there's a path to turning a hackathon project into a company, and it's not fabled. It's not something that's impossible. It felt impossible for me and it felt impossible for my co-founder at the start, but it takes a lot of grinding. It doesn't take grinding like 16 hours a day, but it takes a lot of, you know, trying, getting customers, selling.

Um, and if there's like three pieces of, if there's like one thing I can summarize, it's like build a product that's cool, get customers that are cool, build a story, sell that story, and get a good lawyer. I I I feel like that's kind of the the tenants that we followed. And as long as you keep it simple, I would say u the world is your oyster. But yeah, any any questions from the audience? Yep.

Okay. So, I I feel like I I want to put things in perspective. So, I I was at Duke for like three semesters. I left. So, there's like a there's a significant network at Duke.

Uh but when it comes to like actually having that network, I I didn't really have anything. I was like 19. Noah was just like a fresh college uh not college graduate. Um I think it's all about like all about uh the merits of what you're building rather than the merits of yourself. Not all of us are blessed to, you know, be in like pedigree families or um have like, you know, crazy internships that we got um I forget the word, but you know, got got pushed into.

Uh but so I would say if you're starting and you don't have much of a background, um it is all about your personal skills. Make cool products, get customers. The numbers don't lie. If you can get if you build like a website that looks like a Figma diagram like like a loi and you're able to get 300 customers and you're able to grow that like three four five% a week those numbers don't lie and if you can tie them to a story um you know maybe 95 VCs 99 VCs will reject you but there will be one that sees the merits of what you're building rather than the merits of yourself. Uh that being said, like building a personal brand, like coming off as like an intelligent person, be being knowledgeable, um being able to think on your feet.

Um those are things that really help you in building that network because it builds like immediate like rapport and respect. Go ahead. Like what's the legal process for for fundraising? Okay. So, in terms of like getting a good lawyer, there's a lot.

Uh, we use [ __ ] which is like big law. They charge us a lot of money for for their associates even. Uh, and that's actually who we started off with because we had some hackathon winnings. But I would say like work off references. If you can end up networking with founders, you can figure out what lawyer they're using.

Um, there's legal advice is like far and few between. Like good lawyers are really hard to find, but you'll know that they're a good lawyer when you can ask them questions like, "Oh, what valuation should I be raising at? Um, they're throwing this curveball at me. How do I respond back?" Or, "We're going through this thing in the DD process.

How should we respond?" You'll know if it's a good lawyer if you can ask a question, they have the answer, and you don't feel afraid to ask that question as well because you don't want lawyers that like intimidate you or try to act like holier than thou. Any other questions? Yep. So the question was like if there was something I learned and could approach the second time around.

Um it would be if you have like a huge connection like uh one one of my college connections the actually one of my only college connections was this like managing partner of this huge VC and he was our first pitch ever. Oh my god we messed it up. It was really really bad. It's a name that you guys will all recognize. Like it was embarrassing.

So I would say do a lot of practice. There's going to be like the big one. You'll know when a meeting is the big one and you'll know when a meeting is like the you know it's just a meeting, right? Like oh my god like it was so bad. So, you know, I would say like recognize like when real is real and when fake is fake and just do a lot of practice um and make sure that you know what you're talking about before you go talk to the big guys.

Any other questions? Cool. Uh well, anyways, uh hopefully this is helpful. I mean, I I didn't really have an agenda for this. I I applied to be a speaker and I thought it would be cool to talk about it.

So hopefully this inspires somebody in the audience to like you know turn their hackathon project, turn their code into something that's like I mean like I I feel like I feel so blessed like we have a we have a great team. Uh we have like amazing product. We have cool customers and like all of that wouldn't be possible if we just if we didn't decide to just like send it. And I just wanted to thank like um yeah thank you guys for listening. Um and yeah, have a great conference and let me know if you have any questions.

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