Bear Market Guide 2023: A Complete Guide for Web3 Startup Founders

For those entering the world of Web3 startups, bear markets can be tough and often difficult to navigate. Whether you’re a new web3 founder or an existing company, understanding how to handle such conditions and what strategies work best for your business can make all the difference. In this blog post, we’ll explore the nuances of navigating a bear market as a Web3 startup and provide actionable tips on how to not only survive but thrive during these challenging times.

In a bear market funding is harder to come by and valuations are lower than they were in the recent past. While this may seem like a negative development, it actually presents a great opportunity for web startups. Investors are more likely to invest in companies that are cash-flow positive and have a clear path to profitability. This means that web startups with a strong business model and sound financials are more likely to find funding in a bear market.So, if you're thinking about starting a web3 startup, now is actually a great time to do it. You just need to make sure that your company is well-positioned to weather the current market conditions.

The Bear Market Guide

A bear market is a prolonged period of falling stock prices. It can be caused by various factors, including economic recession, high interest rates, and investor fear. While a bear market can be painful for investors, there are some things you can do to survive it.

Don't panic and continue to BUILD for the long term

It's important to keep a cool head during a bear market. As a startup founder, you’ll be faced with many challenges. The market is volatile and the economy is uncertain. You have competitors that are trying to out-do your business model and take away your users. It can be tempting to focus on these short-term difficulties instead of focusing on long-term goals. But if you do that, you’re going to be overwhelmed by all the things that are going wrong around you (and there will always be something!). Instead, try focusing on what matters most: building a company for the long term.

Reduce cash burn and keep your financials in-check

The first thing to do is understand what your burn rate is, which can vary significantly depending on the stage of your company. For example, a pre-seed startup will be burning through less money than an early stage one. Your runway and cash-on-hand are of the most important metrics you should be monitoring. It’s harder to fundraise during the bear market where investors have a stricter criteria when conducting DDs so you should be able to budget effectively. Use cash flow forecasting tools like Nomentia. Be sure that any liabilities or debts are listed on an accurate balance sheet as well; this includes loans from partners, investors or loans made by others who expect returns. This is a great opportunity to reassess how much staff you need, if any at all. The same goes for other resources like office space and equipment; if they aren't essential to your business' growth then get rid of them.

Understand employee turnover

When your company is in a bad financial situation, employees are more likely to leave. This includes a decrease in morale and productivity, as well as an increase in turnover (the rate at which employees quit). Determine what strategies you can implement to retain key employees. One way to do this is by increasing the ways that your team feels valued and supported; another way is by giving them opportunities for growth and leadership roles within the company.

Understand the impact to your customers

Understanding how your customers are coping with the situation will help you understand what actions they might take in response. This may sound simple, but it's important to get this right. If your customers aren't using your product for the reasons that you think they should be using it, then it won't be successful no matter how good it is.

Diversify your investor base

Investors tend to be less willing and able to invest, period. There are a lot of good reasons for this, but the two most notable are that it's harder for investors to find opportunities and they're looking for more traction before investing. It is important to keep your investors as diverse as possible. Having only one investor can be risky, especially if they have a lot of control over your business. If you are relying on their money for the continued operation of your company, it's important that they understand the ins and outs of what you do. It's also important that an investor understands how much money they can invest without taking over control of the company.

Understand the impact to your user-base

You need to understand how the bear market will impact your users.

If you have a consumer-facing product, consider how it will impact their purchasing power. If your product is used by businesses and they are cash strapped during a bear market, they may not be able to upgrade or renew subscriptions. They might even want to cancel services altogether. You should be prepared for this possibility and communicate clearly with customers about what it means for them when things are slow within their industry/businesses that rely on yours as well as discuss possible solutions.

Have patience

Bear markets can last for years, but eventually they will end and the stock market will rebound. If you hang on to your roadmap during the tough times, you'll be well-positioned to take advantage of the recovery when it comes.

The bear market is not a bad thing. It is an opportunity for the best Web3 founders to shine. They will be the ones who have the foresight to see through all the noise and focus on building something great that people actually want. With the right strategy and research you can ensure that your Web3 startup survives. Keep track of changes in the industry, adjust your strategy as needed, and remain committed to your vision for success. With these tips in mind, you should be well on your way to coming out of this bear market stronger than ever.