• Micro Empires
  • Posts
  • Weekly: Lessons From A "Failed" Web3 Startup (Part 1-2/5)

Weekly: Lessons From A "Failed" Web3 Startup (Part 1-2/5)

Weekly #029

Author

George Samuels
November 20th, 2022

Happy Sunday fellow wayfinder!

Last week, we discussed the FTX saga and the importance of foundations.

This week, we'll look at some hard lessons learned from my Web3 company Honā, created in late 2020, but which I announced I'd be shutting down on November 15th, 2022.

Let's dive in.

Reading time: 6 mins ☕️

Honā was a Web3 accountability platform I launched in December 2020. It came about as an experiment to combine habit-tracking and original BitCoin technology. But due to timing and a few other factors, I made the difficult decision to shut it down in 2022.

The original idea won over billionaire Tim Draper, who I pitched to at a startup competition. The concept earned first place against 80 other startups from around the world. One startup even proposed a way to terraform Venus 🤯

As part of the 1st place prize, I received a pre-seed investment from Draper U Ventures. This led to me forming a company, hiring a team, and building a product in a very short period of time.

Sidenote: I was already running another company (Faiā) during this time.

Lessons Learned

"I never lose. I either win or I learn." ~Nelson Mandela

I learned many lessons from this venture. So I split each into 5 different categories. The categories include investment, product, marketing, management, and market.

This week's newsletter will cover Investment and Product lessons. The following weeks will cover the other three categories (so stay tuned).

💸 1. INVESTMENT

Do your due diligence

I set up my first company in Singapore in 2018. With this second company, Honā, I had to figure out whether to set up in the same country or the US. I ended up choosing Singapore because I felt the process would be simpler. Once decided, Draper U Ventures then did their due diligence, and so did I. So I sought out someone with more experience to assist.

Hire a good lawyer 

My process for finding a good lawyer started with my networks. Still very old-fashioned in that sense. But here's what I did:

  • Asked around amongst my founder friends

  • Signed up for the Singapore government’s startup hub network (Enterprise SG)

  • Joined a few private WhatsApp groups

I ended up settling with a lawyer named Raj, who Vikram Bharati recommended. Vikram's an ex-client and friend, who founded a startup hostel called Tribe Theory (which was later acquired and renamed to Draper Startup House).

Raj did a fabulous job. He helped me understand the subtle differences between Singapore and United States taxes. Especially at the time of selling your business.

In Singapore, there are no capital gains taxes when selling (you can confirm this on Singapore's IRAS site here). In the United States, the tax upon sale would either be 10% or 35% (depending on the number of years in business).

So it pays to ask around and find good legal advice. Unfortunately, Google isn’t always the best for this. Referrals and relationships still matter in this regard.

Learn the jargon 

An aspect of the investment world, especially when raising, is understanding all the jargon that comes with it. There’s a lot of legalese, so I wish I understood more of it upfront.

However, this is what it means to be an entrepreneur - to learn to do by doing.

Another friend of mine, Vanessa DiMauro, suggested a book called Venture Deals (4th Edition): Be Smarter Than Your Lawyer & Venture Capitalists. Highly recommended. I wish I had it before I got started with everything.

And if you have any friends working for VCs, or are VCs themselves, chat with them or get them to review things for you. It goes a long way.

Start raising earlier than you expect

If you do decide to fundraise, start building relationships and generating leads way before you need to. I made the classic mistake of leaving this to the last minute, putting me in a position of desperation vs. power. My hubris led me to believe it'd be a breeze getting a second round.

This couldn't be further from the truth.

So if I were to do it all over again, I’d actually start by listing my startup on a platform like MicroAcquire (now Acquire), hands down.

Why?

Because it's not just a place for you to list when you need to sell (although it's great for that too). It can be used as a direct lead gen for high-quality investors. I got a lot of great leads this way. I'd also list it on OnePager.vc.

Once you have a good list of potential investors (try to capture around 100, as advised by one of my mentors), then use a tool like Cabal to send out consistent investor updates.

My younger brother from another mother, Ajay Prakash (a serial entrepreneur in the education and deep tech space), does a great job of this. Highly recommend following him and his latest startup, EntryLevel.

🧰 2. PRODUCT

A "good" product isn't enough 

Honā got a lot of positive feedback on its design. Unfortunately, this was not enough in the scheme of things. This reiterated what I already knew about products and businesses - it’s a mix of elements that leads to success, not just one.

Use design tools that work best for you

To design Honā, I used a relatively unknown tool at the time called Framer. The design industry standard was/is Figma.

But what I loved about Framer was its more intuitive interface and its access to web animations (without plugins). I tried Figma for a bit, but it just felt clunkier to me.

Here's me talking about it in 2021:

Here are designers catching up in late 2022:

As some say, "what’s popular isn’t always what’s true." But sometimes you can be a bit too ahead, which goes back to the timing aspect mentioned earlier.

Intrinsic vs. extrinsic motivation

An important part of designing the Honā app was understanding habits. I read a fair few books on the topic including (but not limited to):

After 6 months of studying Honā users, I learned a crucial lesson: most people love the idea of accountability (especially with others), but very few like to hold themselves accountable.

Accountability is not particularly sexy, because it requires self-discipline. However, over time, commitment and consistency can become hallmark traits. And that's what blockchain (as originally implemented by BitCoin) helps assist.

My hypothesis was that accountability would become more important as blockchain-related ecosystems matured, made evident with the whole FTX debacle. But looking at the reality of current user behavior, perhaps it'll take another 10-15 years before accountability becomes a more desired virtue in the world.

Useful Tools & Resources

To summarize this first part of Honā lessons, here's a list of tools and resources mentioned throughout this write-up:

Hope you found today's lessons insightful! Stay tuned over the next two weeks for more Honā lessons around marketing, management, and market.

Until next week, remember: through patience & persistence, it will come.

GeorgeTwitter | LinkedIn | Blog | Tools

What did you think of this week's edition?

😔  |  🙁  |  😐  |  🙂  |  😍

Login or Subscribe to participate in polls.

Last week's premium newsletters:

❤️ Loved this content? Get deeper insights about growing one-person businesses, building productive communities in the blockchain space, and applying ancestral wisdom. Click here to upgrade for $10/mo.

Reply

or to participate.