Timing
This was originally posted as a tweetstorm here
- Strategy thoughts 2️⃣: Timing 🕐
The most important thing to the success of any startup is timing
Being too early or too late is the same as being wrong
If anything, I worry dYdX is early 👇
2. * Thoughts are my own / not financial advice
** When I say “we” I am referring to the dYdX community, of which I am a member, and the protocol overall
3. Chris Dixon has a great post and thinking on timing in startups: https://cdixon.org/2010/11/07/timing-your-startup
4. He often shares an analogy: in the dot-com bubble someone created a joke game of at the time hilariously overambitious startup ideas
Fast forward 20 years and many of these ideas became some of the biggest companies in the world. They weren’t wrong, they were just too early 🕐
5. dYdX was certainly too early when it launched in 2017. We made two major bets:
6. Derivatives would be the largest market in crypto 💰
This did come true, but not until 2020. Later entrants like FTX were able to establish major market share despite starting later
7. DeFi would be bigger than CeFi for trading crypto assets 🌐
Obviously a lot of progress has been made here since 2017, but DeFi still represents < 5% of all crypto trading volume. There’s still a long way to go
8. Additionally, while underlying blockchain technology has been increasing exponentially it is still not in a steady state, and therefore we need to spend huge amounts of engineering time building new versions of dYdX on new platforms
https://twitter.com/AntonioMJuliano/status/1491199078759567360
9. dYdX is by far the market leader in product adoption and quality for a derivatives DEX and even for us V4 will take a year to build
10. So while I think we are early, I don’t think we are *too* early. We can likely still be successful and achieve our goals on a long time horizon
This is why I always say our goal is to become the biggest crypto exchange *in 3–5 years* ⏳🏆
11. Blockchain technology continues to improve exponentially, and we are reasonably close to gaining major strengths while bringing our weaknesses up to 75–90% parity with CEXs
https://twitter.com/AntonioMJuliano/status/1491199067938226176
12. How does being early impact strategy? 🤔
13. Cash management 💰
Per @cdixon: “One way to mitigate timing risk is to manage your cash accordingly. If you are trying to ride existing trends you should ramp up aggressively. If you are betting on emerging trends it is better to keep your burn low and runway long. This takes discipline and patience but is also the way you hit it really big.”
14. The dYdX community treasury remains strongly capitalized, and there is plenty of room to scale up its spending 📈
I also think we should partially diversify the community treasury into more stable assets to ensure the protocol has sufficient capital
15. dYdX Trading Inc has ~$160m in assets, with a current burn from headcount of ~$6m. This will be scaled up by a factor of 3–4x, but there is enough capital to continue to operate for 5+ years
16. Focus 🔍
Being early also means we need to build for the long term, and focus exclusively on our core product. It does not make sense to branch out into additional product verticals until we nail our core product
17. Momentum 🚀
While it’s important to be long term focused, it’s also critical to maintain momentum. We need to continue to display growth, hire great talent, and keep the brand & product in the public spotlight
18. Our challenge is to focus on key long term product & growth initiatives while maintaining enough strong momentum to not die / fade
This is a really tough balance to strike & is at the core of all strategic decision making
