Sharing oughts and observations from Token2049 in Singapore with some clicks from around the city in between so it doesn't get boring.
The last time I came around was in 2019. The regulatory environment in India was going from bad to worse, and I tried moving here permanently at the time.
It is hard not to draw contrasts between the two trips. Both of them were in the middle of a bear market. Here are how things have changed.
1. There are more VCs than founders in the rooms. This may be because we are in a pro-longed bear market, and conference expenses are high. Most money managers are in the process of raising. Unless the proverbial tap of liquidity opens up at the top (pension funds, traditional allocators), I don't see how money goes towards early-stage organisations.
2. M&A season is nearby. Founders with meaningful IP, process and traction will likely consider capitulating and selling to a larger strategic partner.
Organisations that raised tens of millions last year, with nothing to show for their money, are likely better off hiring a team to acquire firms at pennies on the dollar. This leads me to my next point..
3. The gap between folks who have money - either through selling tokens or raising money- and founders who have product/community could not be wider. A lot of the weird, absurd marketing tactics in 2049, were done by firms with excess capital.
B2B brands marketing as though it is 1980s Japan. Most of these organisations were exchanges desperate for liquidity or a portion of the capital that may leave Binance.
This gap expresses itself differently in terms of the tech itself. There are folks lapping about DeFi and NFTs as though it is still 2021 bull market.
There's relatively less of a limelight on people solving hard problems (account abstraction, RWA, Web3 primitives)
4. Founders are feeling the pinch. Some are honest enough to admit it, but many are still on a charade, talking about their competition being toast. I think intellectual honesty has exponential returns at this stage of the market because it helps filter through the BS and get back to work.
One way this expresses itself is through strange KPIs.
X enterprises preferred partner, Y chain's most used dApp and so on - unless firms can't show (i) a metric that compounds or (ii) a mechanism it captures value through - these are dumb games being played to keep morale high.
The longer the bear lasts, the more games we will see to keep morale high, but a different approach would be (sadly) to lay off and be candid about how difficult the industry has gotten to build in. Offer esops for retention so the ones staying back are actually rewarded. (you should be fighting for esops if you are at a early stage startup and not given in this market)
5. Lots of talks about raising series A/B in equity (only), by projects with tokens. I don't know how I feel about this transition because there's no way it doesn't hurt token owners. But I also understand why founders would do it. Their most prominent backers (VCs) want a mechanism to retain value (for their investments) in a vehicle not exposed to token volatility. So they suggest structuring new rounds that are equity only and put in a small sum of money to help put the round together.
It is a murky world - I haven't spent my time thinking about it, but Idk how to admit it serves token holders well. That's an ugly conversation we will see play out in our feeds in the coming months.
6. Seed stage, looks obliterated. It takes literal balls of steel to be wanting to run a bootstrapped firm, at the seed stages right now. Recurring suggestion to most founders is to scrap pursing new tech layers on products without users and focus on one thing that a 1000 people would use.
Your tool with zk,aa,intents,ai and web3 primitives on it would not matter if nobody uses it. And that matters if you are not sure where the next month's rent money is coming from. Sectors with strong community elements (like in crypto) are tricky because founders confuse community for a business model. Like bro, 90% of those folks are free-loaders looking for an airdrop. Step back and re-assess.
7.The talent base has shrunk a ton. Many people have switched to AI (if on risk-on appetite mode) or gone to traditional roles. This has happened in the past too. What's left are either people that are exceptionally smart and see a wedge (folks from AI, making web3 social algorithm products) or ones that are good at taking on risk with hard problems.
There's a mid-tier, which is literally mid. It is as though they came to crypto, and just stuck around because they made money- and don't know what to do next with their life. It is a thin line interacting with them because there's no business to be made/invested into and conversations are pretty boring if you talk about anything other than crypto..
8. It is an investor's market across stages. Nobody is leading, anything. And the ones that can lead, get to dictate terms and the themes they do want to back. The problem is, if somebody has a vintage fund from 2021, odds are quite high that the fund is drawn-down quite a bit, and these investors are unlikely to take risky bets until their next round is closed.
On the flipside, investors that had a vintage from 2019 or new funds - are in an advantageous position to deploy into more sensible firms at paces they are comfortable with.
Ultimately, revenue still seems to be a founder's best source of capital. The ones with revenue, aren't at conferences ironically.
9. Lots of comparisons between Dubai and Singapore - here's what I honestly think of it.
Singapore benefits from its focus on universities and multi-decade lead on investing in talent. It was a hub for startups even before crypto was a thing because of the corp tax. So there's a multi-decade lead on being a city-state that attracts the smartest.
The labour shortage is becoming quite apparent. Services at restaurants are not in par with what you have in Dubai (which relies heavily on workers from SEA). So for the same unit amount of $, you may get a better quality of living in Dubai. But if you are optimising for research - I'm inclined to believe Singapore is better, for now. Just how the city is designed to inspire thought and creativity is not something Dubai can compete against because of its geographical disadvantage.
Dubai (UAE), does have easier immigration and the benefit of not being as small as Singapore. On a multi-decade horizon, I see the gap between the two closing in quite fast. I do think one would supersede the other because it has more resources in terms of capital and labor.
10. The mood was a lot more worse off in 2019. Capitulation was real across the board. I don't think it is as bad in 2023, because the ones that had to be shaken off left after Luna, FTX and 3AC.
The ones that are remaining are in the worst of their moods if they are under pressure to build, scale and monetise. There is the alternative of being a grift that made a ton of money in the last cycle, but they have their own challenges in terms of an identity crisis that comes with a ton of money and a lack of purpose.
Everybody is figuring out what they want to do.
Nobody has a clue. The ones that band together, may survive.
For the moment, all I'd say is - keep an eye for the ones with their knives out. Because there's quite a few.. a longer bear, means people get more desperate and play even dumber games.