How to Judge if a Crypto Protocol can Execute its Vision
“Ideas don’t make you rich. The correct execution of ideas does.” Felix Dennis
Your investment strategy has a weakness.
You're investing in protocols because you fall in love with the vision. Are you spending enough time thinking about if the team can execute the vision?
Theranos had an amazing vision for its blood technology, but it ended up being a web of lies.
This is a familiar tale in Crypto.
Constant delays are followed up with broken promises.
The project stops updating their Github, and communication stops. You and everyone else in the Discord are holding the bags.
It's easy to hype up a project. You should be asking yourself "How can I tell if the team can actually execute their vision?"
I've done some angel investing in the past. At least I can meet the founder in person. I can grill them on their plans and knowledge. I know that they can't disappear with my money due to laws.
Crypto is different.
This is like Poker and Starcraft - we're making tough decisions with limited information. Teams can build hype, raise money, and disappear with millions.
Reading this article will help you better evaluate protocols based on their ability to execute.
The Challenges of Execution
Running a company is harder than you can imagine.
I've run several companies before and it was hell at times. YouTubers and Instagram "entrepreneurs" don't paint a realistic picture.
I remember having panic attacks because I wasn't sure how I'd cover the next payroll. Or losing a large percentage of my sales because Amazon decided to rip my product off.
Crypto is a competitive blood bath without any rules. Codes and features get stolen immediately. Whales are looking for easy prey. Few people are equipped for this arena.
Here are some of the challenges that the teams go through:
Lack of Experience. Experience isn't everything, but it helps. You now have 19 years old running million-dollar protocols. Some of them have never even had jobs before! So much of running a company is people-based. It takes years to develop the emotional intelligence needed to manage people and communicate.
Bright Shiny Object Syndrome. Founders are visionaries and idea-generating machines. It's tempting for them to launch new projects. Not everyone can run multiple companies like Elon Musk. So instead of focusing 100% on your investment, they start spreading themselves thin.
A Dynamic Environment. It's kinda like a video game where new opponents are coming in every day. Your new feature is got ripped off. One of your partners got exploited and your price is down. Russia invades Ukraine and everyone's bitching about the price. You have to stay on your toes.
There's a Gap Between Being a Founder and a CEO. Someone could be a Gigabrain developer but doesn't have the ability to run a large company. This is why so many founders in Silicon Valley get replaced by a more experienced CEO. Founder / CEOS like Mark Zuckerberg are the exceptions, not the norm.
Study how Venture Capital firms invest. The idea is important, but evaluating the founder is even more so.
Here's what Legendary VC investor Paul Graham looks for in a founder.
What to Look for Before Launch
You're interested in a protocol but it hasn't launched yet. Even though it has the most ROI potential, it also comes with the most risk.
Here are some clues to look for to see if the team's competent.
What has the team accomplished? Research the founders and see what they have accomplished prior.
Here's an example of an impressive resume. This is Stephen Tse of Harmony one.
He has a Ph.D in Cryptography from UPENN. Worked at Google and Apple. Founded a company that sold to Apple.
Was it a guarantee that Stephen would succeed in Crypto? No, but the odds were stacked in his favor. This is why some of us get such a boner when we see "Ex-Google on the team"
Evaluating a doxxed founder is easy. What happens if the team and founder are anonymous?
I'd look to see if the anonymous teams have launched any projects before.
I love Hundred.Finance. Even though vFat is anon, he and his team have a track record with vFat tools.
Audits. Most projects should have an audit done before they launch. Go and read the report. Are there any red flags? Has the team addressed and fixed the issues?
Who else has invested? It's easy to hate on suits. They get deals earlier than you and they've made dumping a habit.
But there's a strong benefit to VCs - They can do a level of due diligence that you don't have access to.
I invested in Platypus.finance when it first launched. I had no idea who the founder Mr. Duckbill was. But Avalabs did fund them. This gave me confidence that the founder and the team were legit.
Look at the documentation / code / website. How you do one thing is how you do everything. Is everything a copy and paste job? Are there typos everywhere?
How clear are they communicating their vision? Roadmaps show that they're willing to have some accountability. It also gives me clues to how they think strategically.
What to look for after a launch
The protocol has launched. Now we're starting to get more clues on how well the team delivers.
Is the team delivering what they said they would? Are their hitting their milestones? This is what a solid roadmap looks like
What's the Quality of the Work? The team has shipped the features. Is it buggy? I was a huge fan of Pancakeswap in early 2021. I exited my positions because the Predictions and Lottery were down more than the ice cream machine at McDonald's.
The team forked the code from Uniswap. Predictions/lottery were their first unique features. I saw that they couldn't execute these simple features, and it made me lose confidence in the protocol.
How are they responding to setbacks? This is DeFi - shit happens. What matters to me is how well the teams are responding to them.
Are they taking ownership?
Do they have a clear plan going forward?
Or are they blaming "FUD" and victimizing themselves?
I want to see professionalism, not emotional responses.
Transparency. Sometimes people will go "dark" and say that they're busy building. It takes a few minutes to write a tweet. Maybe they're fucking around on a beach with Bora Bora with your money.
How is the Founder Spending their Time? Some people can't handle success. Imagine what it's like to be thrust into the spotlight. You now have more money than you can dream of, and a cult of people worshipping you.
I saw this happen all the time in the eCommerce space. Guys would reach the initial levels of success. But instead of building, they wanted to enjoy the fruits of their labor.
Vacations became more important than shipping. Or the founders enjoy making YouTube videos more than building.
Constant pivoting. Pivots happen. But when a team changes its strategy every few weeks it should be a red flag. They're throwing shit against a wall and hoping something sticks.
Here's a thread of a failed project. Go through the entire thread and see if you can spot any warning signs.
Here are some clues:
- Constant delays in building a website.
- People were getting banned for criticizing
- Everything's reframed as FUD
- The GITHUB was dead.
- Emotional responses by the founder
- Unprofessional tweets by the founder about women
Becoming a Better Executor
I know that some protocols and founders are reading this. I don't have all the answers, but here are some things that have worked for me.
Bring on the right people. Don't try to do everything yourself. You don't have the time. Learn to trust and manage people. Bring on the right advisors and the right team members.
Follow an execution framework. Think of them as operating systems for running a company. Check out OKR's, Traction, and Scaling Up.
Default to honesty. You will fuck up at some point. People are more forgiving than you realize as long as you're honest. You owe it to your investors to be transparent. The first step to getting out of a hole is to stop digging.
The Numbers Don't Lie. Every goal should have a key metric that you measure. This lets you know if you're heading in the right direction.
How can you measure growth? Total value locked.
How can you measure adoption? # of daily active users.
Prioritize. You won't be able to accomplish everything you want. It's kinda like playing chess. There are multiple moves you can make, but you have to figure out the best move.
Execution is a skill that you can improve.
Evaluating Wonderland and its Execution
Crypto influencers tend to only highlight their wins. What about their losses?
I made my "name" from covering the Wonderland project. I exited my position when Sifu's identity was exposed. I've spent a lot of time reflecting on that investment and trying to extract the lessons from it.
The project attracted me for two reasons:
- I fell in love with the vision. I've seen how well investment firms like a16z and Blackrock have done. Rebasing mechanics + Yield farming a massive treasury + investing in GameFi made sense to me.
- Dani had a track record of executing. He was the hottest developer in DeFi. Frog Nation didn't lose.
If you look at Wonderland through the lens of this article, what were some execution red flags?
Here are some:
- The team never updated the docs. Wonderland was becoming an investment fund yet the doc refers to it as a currency.
- The constant delays. "wen airdrop" became a meme.
- The Paladin audit was never addressed.
- The constant pivoting. It felt like everything that they did was reactionary.
- The lack of transparency. There wasn't a roadmap. The treasury wasn't audited.
- Dani had a new project every month. There was supposed to be a meme coin on Solana. He was launching ve(3,3) /w Andre. He became the leader of Sushi. All of this was in addition to Abracadabra, Popsicle Finance, and Wonderland.
- Communication was horrible. The community demanded that they hired a community manager to streamline things. But their response was "We want to keep the expenses as low as possible to help frogs." It didn't make any sense when the company was worth a billion dollars.
My spider senses were going off but I didn't act on it. Here are some of the reasons why.
- Authority Bias. Dani had an amazing track record. Abradacabra was kicking ass. Popsicle Finance bounced back from their exploit.
- Social Bias. Everyone in the industry was vouching for Dani. Tetranode and Dani worked together closely. Andre Cronje launched ve(3,3) with Dani. And even the entire SushiSwap community voted him to be the leader.
- Empathy for Shitty Devs. I've had a ton of personal experiences with bad devs. Why was everything delayed? Slow devs. I could relate from my past.
In hindsight, I made exceptions to my own standards.
It's kinda like dating someone that's super hot. Yea you know it's not normal for them to text you where you're at 10x a day, but you ignore it because they're so hot. Next thing you know you gotta file a restraining order because they're psycho.
I know it's easy to blame Dani and Sifu for the investment going downhill, but that's not productive.
Ask yourself what was in your control?
What could you have done better?
In my case, I'm creating a set of standards. Among them are non-negotiables. If a protocol violates my non-negotiables, then I'm out.
You're never going to bat 100% as an investor. If an investment doesn't work out, take the time to reflect and understand the lessons.
Where to go From Here
Remember, this is a game of imperfect information. You have to make the best decision you can without knowing all the facts. We're thinking in bets.
I want you to think back on your investments. How many of them failed because the team didn't deliver.
In hindsight, were there any warning signs or red flags that you could've spotted?