start up reflection: PurpleCreator (2023)
I've had the privilege of consulting and working with various startups, and I find it valuable to reflect on the lessons I've learned to assist others on their entrepreneurial journey. In this post, I'll share insights and tips I gained while working at PurpleCreator, a crypto company that underwent significant pivots.
Unfortunately, after the failure to find product-market fit with PurpleTrader, the CEO of PurpleCreator decided to pivot and essentially start over from scratch. Keep in mind I was there for two major pivots, and this would mark the third one. However, this third pivot meant the end of focusing on social tokens—a type of cryptocurrency—which I'll discuss later in the post.
At this date, I am unclear about the current status of PurpleCreator and whether the CEO is still focusing on the cryptocurrency space. That said, let's dive into the findings from my time working in the crypto space.
Problems we were solving
PurpleCreator initially focused on building an exchange for social tokens, which are cryptocurrencies enabling collaboration and digital ownership among brands, individuals, and communities. These tokens offer benefits like exclusive content, community resources, and voting power. We believed social tokens would be the next phase of the Web 3 revolution, following NFTs and DAOs, with a potential market worth billions.
We identified several challenges within the social token ecosystem that needed addressing:
Hard for traders to discover social tokens: It was difficult for traders to discover social tokens, as they were scattered across different DeFi platforms, making them inaccessible to mainstream crypto traders
Low liquidity: As a result of the first problem, there was low liquidity for these types of tokens. The way it works is that the more liquid an asset is, the easier and more efficient it is to turn it back into cash. Less liquid assets take more time and may have a higher cost.
Lack of metrics that Value Social Tokens: Social Tokens differ from traditional cryptocurrencies because they have strong social and utility components. We believed that the market was not properly valuing social tokens.
Solution
To solve these problems, we developed PurpleTrader, a centralized exchange catering to web 3 traders interested in utility tokens like social tokens. PurpleTrader aimed to provide a user-friendly platform, standardized metrics, and curated tokens exclusively available on decentralized finance platforms.
Major Findings
1. MVP
If you've been involved in the startup world, you're probably familiar with the term MVP, which stands for Minimum Viable Product. It's a crucial concept that involves creating a product or service that is stripped down to its essential features, allowing you to test the market and gather valuable feedback from early customers. The goal is to develop something quickly and efficiently, ensuring you're not wasting time and resources on a product that might not resonate with your target audience. As an entrepreneur, you know that time and resources are incredibly precious, particularly in the early stages of a startup, so it's vital to use them wisely.
In our case at PurpleCreator, we embarked on building our MVP, which took approximately five months.
Looking back, I realize that we invested a significant amount of time and costs into a product that ultimately didn't meet market expectations. In hindsight, I believe our MVP was more complex than it needed to be. I've learned a valuable lesson from this experience, and I believe we could have built a less technical MVP that could have been delivered within a maximum of three weeks. This approach would have allowed us to move faster and minimize expenses.
In retrospect, we should have explored two alternative paths to validate our product-market fit: creating a compelling landing page and an engaging explainer video.
With a well-designed landing page, we could have implemented A/B testing to validate various assumptions and hypotheses about our product. It would have given us the opportunity to gauge user interest and preferences by testing different features and value propositions. For example, instead of focusing solely on social tokens, we could have included a mix of social tokens and other popular cryptocurrencies in our offering. This would have helped us understand whether a broader range of token options would have resulted in higher sign-ups and engagement.
Additionally, an explainer video could have effectively communicated the potential features and benefits of our platform. By showcasing the unique value proposition and highlighting the benefits of participating in our digital economy, we could have generated early user interest and feedback. These methods would have allowed us to validate our ideas, gather crucial market insights, and determine if there was a true product-market fit. The best part is that both approaches could have been executed in a timely and cost-effective manner, allowing us to iterate and adapt swiftly.
2. Understanding User Persona
One of the crucial steps in developing a successful product or new feature is creating a user persona. The user persona serves as a guiding framework throughout the product development process. Typically, insights gathered from user interviews inform the creation of user personas. However, in our case, we encountered a challenge. The individuals we interviewed were not representative of the target market we were aiming to reach. Consequently, we ended up creating user personas based on market research and insights from one of our Founders with previous experience in the trading industry.
In the crypto space, traders are primarily focused on one aspect: how can they make money quickly? This realization, in hindsight, led us to question whether the product we were offering truly satisfied the needs of our user personas. In our MVP, we failed to provide anything that would genuinely fulfill our user personas' requirements.
Reflecting on this, I have developed a few theories as to why this disconnect occurred:
Lack of product offerings (tokens): Traders seek access to a diverse range of tokens for trading. Our platform did not offer a comprehensive selection, limiting the opportunities for traders to engage and trade.
Limited appeal of social tokens to traders: The lack of liquidity and demand surrounding social tokens hindered the potential for profit. Subsequently, we discovered that the social token market had experienced an 80% decrease in trading volume compared to the previous year.
Insufficient competitive features: Our MVP did not fulfill the essential "must-have" features that traders require. Furthermore, our product lacked a distinct competitive edge to effectively compete with other established trading platforms.
3. Understanding Competition
When building a product or feature, it is essential to analyze and understand your competition when developing a product or feature. By examining what other companies are doing to address the problem you aim to solve, you can identify opportunities to build differentiating features or products that can compete effectively in the market. Additionally, studying competitors can help save time by providing insights into the essential features necessary to compete in the market, which I refer to as "Must-Need" features. These are analogous to prerequisites when applying for a job. If your product lacks these essential features, it may not even be considered.
In retrospect, our MVP failed to gain attention because it did not meet the "Must-Need" features required by traders. Let's explore the list of research findings and my assessment of how well we addressed these needs on a scale of 1 to 10:
Wide Range of Cryptocurrencies: A cryptocurrency exchange should support a diverse selection of cryptocurrencies to cater to traders' and investors' demands. Offering access to popular cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH), as well as emerging altcoins, enhances the appeal of the exchange. (Score: 2/10)
Security of Digital Assets: Prioritizing the security of users' digital assets is crucial for any cryptocurrency exchange. Implementing robust security measures, such as cold storage wallets, multi-factor authentication, and regular security audits, helps protect against hacking attempts and potential breaches. (Score: 1/10)
Fast and Reliable Order Execution: In the highly volatile cryptocurrency market, users expect fast and reliable order execution. A high-performance trading engine with low latency is essential to ensure timely order execution, particularly during periods of high market activity. (Score: 3/10)
Risk Management Tools: Implementing robust risk management tools helps protect users and the exchange from potential market risks. This includes mechanisms for margin trading, risk assessment, order controls, and circuit breakers to prevent excessive market volatility. (Score: 1/10)
Market Transparency: Providing comprehensive and accurate market data, order book visibility, and trade reporting ensures transparency in price discovery and trading activities. (Score: 6-7/10)
Fiat Currency Support: Enabling trading between cryptocurrencies and fiat currencies like USD or EUR allows users to easily deposit and withdraw funds from their bank accounts, providing a seamless onboarding experience. (Score: 9/10)
Liquidity: Similar to traditional financial exchanges, liquidity is crucial for cryptocurrency exchanges. A deep order book with substantial trading volume ensures smooth order execution, reduces price slippage, and enhances the overall trading experience. (Score: 4/10)
Competitive Fee Structure: Balancing revenue generation with competitive transaction fees, withdrawal fees, and listing fees is essential for sustainable growth in the market. (5/10)
User-Friendly Interface: An intuitive and user-friendly interface is crucial for attracting and retaining users. Providing a platform with easy navigation, comprehensive trading tools, real-time market data, and efficient order management capabilities enhances the user experience. (Score: 4/10)
Regulatory Compliance: Adhering to relevant financial regulations and obtaining necessary licenses is vital for the credibility and legitimacy of an exchange. Compliance with anti-money laundering (AML) and know-your-customer (KYC) regulations helps prevent fraud and ensures a safe trading environment. (Score: 10/10)
Mobile Trading Applications: As the usage of mobile devices increases, having dedicated mobile trading applications for iOS and Android platforms enables users to access the exchange and trade on-the-go, providing convenience and flexibility. (Not developed - N/A)
Furthermore, analyzing your competition can also provide valuable insights into what not to do. At the time, many prominent crypto exchanges faced backlash regarding how they handled customers' digital assets. I believed we had an opportunity to assess and improve upon the mistakes made by exchanges such as FTX, Coinbase, Gemini, and Binance in this area. Looking back, I realize that we could have capitalized on this opportunity by prioritizing and innovating in the realm of security and the handling of digital assets. I’m not sure what we could have done, but it would have been worth exploring more into this area and assessing whether that could have our competitive edge.
4. CRYPTO LANDSCAPE
However, even if we had executed everything flawlessly during the development of our product, we still encountered external challenges that made success in this market incredibly difficult. As an entrepreneur, you understand that working at an early-stage startup is already a risky endeavor but venturing into the crypto space adds another layer of complexity. Currently, the crypto industry, particularly in America, is grappling with regulatory uncertainties.
This year alone, we witnessed the SEC taking stringent actions against major crypto firms that were once considered industry leaders. These regulatory interventions indicate that no company is immune to scrutiny. Consequently, these developments are not only causing hesitation among investors but also deterring entrepreneurs from innovating and driving the industry forward.
Furthermore, the task of onboarding the next billions of users into the crypto ecosystem becomes increasingly challenging over time, hindering mass adoption. Unfortunately, the industry has acquired a negative reputation due to the proliferation of scams and fraudulent activities that have plagued it in recent years. As I discovered, many individuals who are unfamiliar with the crypto space immediately associate it with these negative incidents rather than recognizing the innovation and immense potential the technology offers. It's not entirely their fault; the tarnished image of the industry has created significant barriers to trust and adoption.
As entrepreneurs, it's essential for us to acknowledge and navigate these external factors that influence the success of our ventures. While the regulatory landscape and public perception pose challenges, they also highlight the importance of advocating for responsible practices and promoting the genuine value that cryptocurrencies and blockchain technology can bring to various sectors. I do still believe in this industry and the potential it has to revolutionize the global financial system. By proactively addressing these concerns, we can work towards creating an environment that fosters innovation, trust, and broader adoption of crypto solutions.
5. Remote Work Model
During my time at a previous startup, I experienced the daily grind of commuting for 1 hour and 20 minutes each way. Some days, it felt like a needless waste of time when the work could easily be accomplished remotely. However, when I joined PurpleCreator, I had the opportunity to work fully remote and enjoy a higher salary. Let me be clear, I am a strong advocate for remote work, but there were instances where I missed the benefits of collaborating in person with my colleagues. There's a certain magic that happens when a group of individuals is physically present in the same room, working together to solve challenges. Unfortunately, at PurpleCreator, due to our remote setup, we couldn't fully replicate that experience, and I believe it affected the outcomes of our brainstorming sessions.