Letter 11: Can Your NFT Collection Succeed as a Startup?
On nurturing ideas to build your web3 business
Startups are notoriously difficult.
With a failure rate of around 90%, few things are harder than getting a startup off the ground. Web3 businesses are no exception. While there isn’t much data to sift through yet, it’s almost certain that the chance of success for an NFT collection is just as poor, if not more, than a traditional startup.
But what do you do when you have a long term vision that extends past a single NFT collection launch? How do you go from JPEGs to a sustainable web3 business?
There are few guarantees in startups or NFTs, but there are commonalities we can see in the study of startups that have succeeded.
Background
Going outside of my comfort zone, I spent the week reading dozens upon dozens of interviews of startup founders, CEOs, early stage investors, VCs, and more, with a particular focus on those in tech and web3 whenever possible.
At first I was planning to go the traditional route of highlighting a few companies and public figures which I could write about and serve as a blueprint for anyone trying to launch their own startup. But after the 30th or 40th article, I considered the benefit of going a bit meta and aggregating all of the articles in order to distill it down to a series of useful bullet points of repeated advice I had read.
So that’s what I did.
It’s worth mentioning that this article is not targeting 1/1 artists. If your focus is solely on art and establishing collectors, then you should just keep on keeping on.
But if you see your NFT collection as a starting point and intend on taking those earnings and using them to build future products or services, then I highly suggest you read on.
While nobody can set the stage perfectly for success (a certain degree of timing, luck, and randomness will always play a part), there was a surprisingly high amount of overlap in the advice I encountered.
Let’s dive in.
Coming Up With a Winning Idea
The best way to have a good idea is to have a lot of ideas.
- Linus Pauling
The idea is where all potential startups live or die. The right idea can be a massive leap in the right direction; the wrong one can mean project death before you’ve even begun. So how can you tell between the two, and when do you know you’re onto something? Consider the following:
Explore a field you are interested in, passionate about, and well-informed.
Identify specific problems that exist in the market, and determine which you are most equipped to fix: think about problems you’ve encountered with some regularity which have not been properly addressed. Then, see if your problems are shared by others.
Is this a problem you would pay money to solve? If not, why would you expect anyone else to?
Do not conflate wants with needs. They are not the same. Try to find problems that need resolving immediately, not just features that some people want.
Education is a noble pursuit, but it is also a time-sink. The less you need to instruct or explain, the happier everyone will be. Whenever and wherever possible, reduce the complexities of your product, and use clear, concise language in all of your communication.
Find your product wedge, that thing which you’ll use to get your foot in the door of the market and gain your first customers.
Find something you’re passionate about and keep tremendously interested in it.
- Julia Child
Talk to everyone you can in the market you’re targeting. Focus on their biggest problems and obstacles.
Identifying trends is useful information; marketing and building entirely off of them is a recipe for disaster.
Successful businesses generally present a better way of doing things, which in turn saves the user money and/or time. Which are you targeting? Time? Money? Both?
Remember that it’s better not to have a startup than to launch the wrong one. Be patient and wait for your opportunity.
Traction: Proof of a Winning Idea
Ideas are fine and dandy, but traction is what you ultimately seek. Has your MVP (minimum viable product) caught the eye of your target demographic? Is it starting to catch on? Do they even want it? Here’s some suggestions to help you make further refinements:
If it still feels like a lot of work at this point to clearly identify the problem you’re trying to solve, it may already be too late, or the problem is not one worth solving.
Every founder spends a considerable amount of time (especially early on) reaching out to people. But when other people begin seeking YOU out instead, you’re onto something.
Use an MVP to get early feedback before you build your full product. MVPs help you test your viability in the market and identify core problems. Ignoring this increases the odds of you wasting your limited time and resources if the product doesn’t pan out.
When it comes to interviewing potential customers, assume anything short of “when can I get this” or
is a “not interested”.
Understand the mechanics of building momentum (we touched on two of these methods, Hedgehogs & Flywheels, in a previous letter).
Only expand your core products or services if you’ve already found product market fit.
If people are enthusiastic about what you’re offering and can see past its current bugs and limitations, you’re on the right path: users working with incredibly janky products and still remaining enthusiastic about their potential is a great sign that you’re approaching product market fit.
If you haven’t seen demand from the market by this point, you probably shouldn’t release your product at this time.
If you are wondering if you have product market fit, you don’t have product market fit.
How to Use Disappointment to Guide Decisions
Sounds strange, huh?
In an article our CTO found on First Round Review by Rahul Vohra, the founder and CEO of Superhuman, he mentions some advice Sean Ellis (who ran early growth for Dropbox and Eventbrite) had come up with:
Ellis had found a leading indicator: just ask users “how would you feel if you could no longer use the product?” and measure the percent who answer “very disappointed.”
After benchmarking nearly a hundred startups with his customer development survey, Ellis found that the magic number was 40%. Companies that struggled to find growth almost always had less than 40% of users respond “very disappointed,” whereas companies with strong traction almost always exceeded that threshold.
There’s a lot of useful information to take from that article, but a few additional pieces of advice which really stood out were:
1. Make sure that the product or service you’re making is wanted “urgently”.
2. You can bring to market things that even a small amount of people want, so long as the demand from that niche group is strong.
3. Founders should more or less ignore the requests of anyone who would not be very disappointed if your product disappeared overnight.
General Advice
There is only one boss. The customer. And [they] can fire everybody in the company from the chairman on down, simply by spending [their] money elsewhere.
- Sam Walton
In my reading, I found a lot of useful advice that did not necessarily fall under the categories of coming up with an idea or traction, but are nonetheless worth sharing:
Pay close attention to how users use your product. People are clever and will discover all sorts of ways to engage with it. Let them do the work for you, and look for potential features and upgrades that you can deliver on.
Do you know your strengths and weaknesses? How about your team’s? Do not try to be a Jack or Jill of all trades: hiring those who fill essential gaps in your skillset will likely save you time and money over the DIY approach.
You need to be your project’s biggest supporter, believe in your idea, and feel that in your gut, it is needed. This isn’t some hokey manifest-your-destiny type wish fulfillment, it’s the reality that if you can’t muster confidence for your own business, nobody else will either.
Do not stray from your core value proposition (the key benefit that sets your business apart, and the reason why someone should spend money on you, rather than your competition).
Everything in web3 is still up in the air: understand that nearly nothing is determined in the space right now. Be prepared to set aside substantial amounts for taxes, and do not overlook the seriousness of SEC regulations and whether or not you’re meeting the Howey Test.
Think long term. If you’re only focused on what’s just around the bend, you’ll always be playing catchup.
Waitlists are not just vehicles for hype, they provide a vital opportunity to test multiple iterations of your product out on different users. This closed system testing can help shape and prioritize the changes that you need to make.
Prioritize your problems, as there will always be bugs that need fixing. Start with the most critical, and those which could impact the greatest amount of users, and work down the list from there.
If there’s a better way to do things, then do it. Don’t get attached to an idea just because it’s yours.
Never forget that your customers are the greatest resource in identifying problems with your products, features you’re missing, and whether the market will understand/accept/care about what you’re selling.
Celebrate!
One piece of advice we take to heart at Curious Addys and which we believe all startups should practice is celebrating our victories.
Acknowledging the hard work of every team member is great for company morale and provides a personal sense of accomplishment. It cannot be overstated how much giving someone kudos for their contributions goes towards maintaining a happy, healthy team.
In addition to team lunches (on the company dime, of course!), everyone participates in a bimonthly “Show & Tell”, where we’re given the opportunity to share with the rest of the team whatever it is we’ve been working on recently. Not only is this good for bonding, but it serves an additional purpose in that it helps keep the lines of communication open between the community/marketing side of the company and the engineering/operations side.
We’re also about to have our first offsite meetup, where we’ll spend several days doing escape rooms, going bouldering, eating a ton of delicious food, and exploring whatever fun ideas come to mind.
Do not consider this as something optional or just “nice to have” at a company. Lead by example, celebrate your victories, and acknowledge your team. We’re all in this together.
Conclusion
If you regard your NFT collection as the business, you’re playing a losing game. In a bear market (especially one with unenforceable royalties spiraling towards 0%), expecting to get by on that alone is not a successful business model.
Our suggestion? Let your NFT collection serve as a launchpad to even greater startup ambitions.
Written by: Brad Jaeger
Director of Content @ Curious Addys (say hi on Twitter!)