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Raising capital is one of the toughest phases in a startup's journey. Not only do entrepreneurs need to find and attract investors, they are often exposed to macro-market movements that can dry out capital when industries are in times of stagnant growth. Since 1929 there have been 28 boom-and-bust cycles in traditional markets and countless others in emerging markets. This volatility presents as many challenges as opportunities for committed entrepreneurs.
The blockchain industry is no exception as it has deviated from the early-stage VC funding overshoot in 2017 of $ 4 billion to a complete collapse in 2018. The aftermath of this crash lasted over two years, and many entrepreneurs went out of business or gave up. For those lucky enough to start their projects, the situation slowly began to improve when 2020 brought new impetus to the industry in the form of decentralized financing.
For companies like RAMP DEFI and CEO Lawrence Lim, starting a business in 2019 amid a bear market was a challenge, especially when dealing with investors. After a rocky start in 2020, the team raised more than $ 1 million, with the round being oversubscribed 15 times by investors who wanted a piece. All of this happened in less than nine months, and Lim was kind enough to share his company's history and greatest insight for aspiring entrepreneurs in difficult situations.
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1. Focus on building through adversity
Startups can't always control the market they're in, but they can control how much time and effort they put into making things work. For RAMP, the 2019 Bear Market offered the opportunity to refine the fit of the product market and learn how to build on a tight budget. They brought their product to investors in early 2020 who showed limited interest and the team was unable to successfully run its fundraiser. Then Covid-19 happened and the world was turned upside down.
Lim explains, “RAMP started prototyping financial derivatives for digital assets in late 2019 and realized that a tremendous opportunity was emerging among the difficult industry. We financed the product development ourselves, which is not easy as the team does not come from a wealthy background. We have had many moments of doubt, but when you believe in your vision and the market you are serving, it will be easier to hold your own in difficult times. ”
2. Try to solve your own pain points
When the funds were passed on to RAMP's first position, the DeFi industry took shape, and early in the second quarter of 2020 there were first signs of a revival for DeFi. Lim and other key company executives were fully immersed in the industry as it encompassed many aspects of RAMP as it was early on. The team invested and found firsthand that the immature industry had significant opportunity costs associated with it, as capital was often constrained due to various interest-bearing programs such as equity investments and term loans, giving investors a bond-like return over a period of time.
According to Lim, at that moment a "light bulb went out" and the team realized that their original thesis about this new DeFi structure that was emerging was correct, but needed one final change in design. "We finally had the opportunity to personally validate our thesis against real-time pain points," he explains. "When in doubt, try to build from a location of a personal problem and offer a solution to that problem."
3. Small actions can make a big difference
Sometimes the smallest of actions are catalysts for a startup's growth. Think of all the success stories that have grown out of chance encounters, small actions, or taking a chance when nothing else seems to work. For RAMP, this new insight led to some strategic business hubs to align with the team's experience as an active market participant.
The team renewed their prototyping efforts in this new direction and shared this insight as a blog post on Medium. Without marketing, this one medium article was discovered by several VCs and quickly disseminated in the VC community. Shortly afterwards, influencers asked publicly about the project. That one article changed the fate of the company because it was published at the perfect time and seen by the right people.
That's why Lim advises: “When in doubt, just do it. Don't be afraid to stand behind your idea and interact with your potential market for instant feedback. This is the fastest way to quickly repeat the adjustment to the product market, ”explains Lim.
4. Create win-win scenarios with smart investors
A common misconception in the startup industry is that all VCs are good. If they want to invest, startups should take their money. But often VCs will pursue projects that are hype up with no real interest in a company or overlapping strengths. The best investors tend to be strategic investors who are excited about creating value beyond cutting a check.
Lim says, “Strategic investors have helped us a lot with our private sale process which resulted in a significant oversubscription. Beyond strategic investments, our strategic investors have helped with valuable business relationships, eye-catching partnerships, marketing plans, product development, and everything in between. "
For entrepreneurs bumping into a wall, keep in mind that adjusting the product market properly will ultimately result in a paying customer or interested investor. The key is to be persistent, choose the right partners, and find investors who share your long-term vision.
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Disclaimer: This article is for informational purposes only and should not be used as investment advice. Please consult your financial advisor before participating in blockchain or investing in blockchain. The author of this article has a personal relationship with RAMP and has used that relationship to provide insight for this article.