Being an entrepreneur in BSV today is a unique challenge. The modern expectations of tech entrepreneurship map poorly to the circumstances facing these entrepreneurs. The typical playbook for today’s tech startups is to go fast and break things. Getting users quickly is the name of the game for these companies since there typically isn’t much holding back a well-funded competitor from beating them to the punch. While this approach may be possible in BSV, there are barriers and considerations that don’t exist to the same degree in other areas.
The nature of competition is that it drives companies into specialization. The nature of specialization is that significant cooperation is required between companies to deliver useful products to customers. The more one zooms out, the more apparent this becomes. Compared to other sectors, BSV is heavily undeveloped. It might not be quite the challenge Robinson Crusoe faced, but given the lofty expectations for BSV, there is much work to be done on the basics. Underdeveloped basics combined with the long-term need for specialization brings frustration due to the necessity of cooperation. This frustration may be magnified by the sense that BSV entrepreneurs aren’t going as fast as they can. What I’d argue is that the incentives facing BSV entrepreneurs suggest two things - that going as fast as possible is disincentivized and that releasing products which reveal a previously unknown competitive advantage is also disincentivized.
While I will argue that these are both the case, that doesn’t mean that BSV entrepreneurs are incentivized to act without urgency. On the contrary, this period in BSV’s history is absolutely essential to the current set of BSV entrepreneurs. This is the time where those who saw the potential early can gain their largest lead on future well-funded competitors: new startups, existing well-established companies, and ultimately the tech giants. The name of today’s game is not to go fast and break things. Rather, today’s objective is to move as fast as possible within the current constraints to emerge as far ahead as possible when the real race begins.
The Elephant in the Room
It’s no secret that most people in BSV think that there is at least a possibility that Craig Wright is Satoshi and has access to Satoshi’s Bitcoin. Based on public statements of known parties and the timing of the court case, one would expect some event involving this fortune to occur before the end of 2021. If this is the case, then one could project that there will be a dramatic turn in the crypto industry that results in extreme appreciation of BSV relative to other crypto-assets. And, beyond simple asset appreciation, this event would also draw significant interest in BSV. This interest could come in a few forms - more investment capital, more interest in using BSV products by individuals and businesses, and more media attention. Even if one believes that there is only a 10% likelihood that this will occur, it demands a strategy that takes this into account. If one believes that there is a 90% likelihood that this occurs, then one’s whole business strategy must necessarily revolve around this timing.
Entrepreneurs end up giving years or decades of their lives to their businesses. While this is often driven in part by non-monetary factors, the appropriate remuneration for the required level of dedication and risk-taking is massive. Accordingly, entrepreneurs should be stingy, albeit practical, about parting with equity in their companies. With a black swan event on the horizon as described above, the going rate for equity in existing BSV businesses could easily increase by two to ten fold over the course of a month, a week, or even a day. With the recent DeFi bubble, it seems some people in BSV are eyeing the valuations ascribed to other companies in the crypto space with much less long-term potential and can smell the VC influx. If Craig moves coins, BSV companies are going to be a much hotter commodity than they are today. This forces businesses to be strategic about parting with equity. Going quickly now is great, but at what cost? If businesses can prepare to move quickly when a capital influx hits the industry without sacrificing equity today, then they are at a long term advantage.
Investors face a similar conundrum. The short term prospects for the asset BSV are so good that BSV startups face a high bar. Even entrepreneurs like Jack Liu are quick to point out that BSV is a much safer investment than a startup. There isn’t a large set of investors for BSV companies in the first place, and these investors are among the few who also realize the asymmetric upside of BSV the asset. This places startups in an even more precarious position. Their limited pool of investors has an extremely high bar for allocating capital in the present, and the future suggests that capital will be cheap and plentiful. If it weren’t for investors like Ayre Group who have done yeoman’s work in helping to seed the industry, these forces may have resulted in an even more conservative pace by BSV entrepreneurs than what has been observed.
Few Users
It is a testament to BSV’s long term potential that there are real businesses with real users. Most blockchain networks have virtually no users, even those that have many more small investors than BSV. However, many of these users are BSV enthusiasts which makes their app usage a bit of an industry false positive, since it isn’t clear that they would use the apps if they weren’t so excited about the industry as a whole. The least charitable view of these users is that they are trying to pump their own bags by using BSV apps, but I think this is largely not the case. Personally, I have really enjoyed using powping, Twetch, Streamanity, Bitping Handcash, Moneybutton, and many other applications. I doubt I would have found these if I weren’t a BSV investor, but I would continue to use them even if I couldn’t invest in the BSV space any longer.
Unfortunately, exceeding the low bar of crypto networks by usage doesn’t equate to having a significant user base. When one considers the opportunity cost of man-hours spent developing BSV products, it is extremely unlikely that a business could be profitable today with the limited (generously low five-figures) number of users. This means that businesses which release duplicatable technologies take on a risk that the short-term increase in usage or revenue is exceeded by the long-term cost of giving competitors notice of one’s plans. The wide-openness of the BSV landscape has lessened the cost of giving information to competitors, but that is likely to come to an end quickly.
Compounded by Cooperation
These two factors, the rationality of waiting to spend equity until after a potential black swan event and the low number of current BSV users, are cruelly compounded by the necessity of cooperation. Each BSV company must specialize, at least to a certain extent. This necessitates an interdependency between many BSV startups. What one finds is that this interdependency of startups, each of whom is not incentivized to move quickly to benefit the others, is very likely to lead to a sense of stagnation while individual startups leverage limited resources behind the scenes to prepare to take advantage of a possible black swan event. When one appreciates this, the level of progress to date begins to look much more promising.
One can roughly divide BSV startups into three categories: user-facing, enterprise-facing, and infrastructure. There is undoubtedly overlap, but ultimately many companies will specialize in one or two of the three. The infrastructure companies serve the user and enterprise facing companies. The user and enterprise facing companies depend on the infrastructure. With so few users, the user facing companies can’t afford to pay anything significant for infrastructure. Without customers, infrastructure companies aren’t incentivized to tip off competition about their innovations and progress. Without seeing infrastructure progress, user-facing companies face difficulties investing in growing their user base since they can’t be sure that new users will have an adequate experience. Enterprise-facing companies face similar difficulties dealing with unproven, often undisclosed infrastructure. For what it’s worth, I don’t think that the lack of traction with applications and businesses today means that today’s these couldn’t end up growing rapidly. The cost benefit analysis for a user can suddenly flip favorably as barriers to adoption slowly recede and networks develop.
There are two main things that can alleviate the challenges above: a massive influx of capital or a massive influx of users. Those users could come from an app that catches fire or a significant increase in general BSV interest. A different kind of helpful usage could come from an enterprise app taking off and helping to fortify infrastructure, making it easier for user-facing companies to invest in user acquisition. A massive influx in capital is most likely to come following one of these user-drawing events or from a black swan event as described above.
When users and capital flow into the space, companies’ appetites for risk-taking should increase dramatically. As capital becomes cheaper and potential revenues greater, moving quickly to acquire users becomes incentivized relative to working in secret and preparing for the future. This is particularly true as a growing user pool reduces customer acquisition cost and an enterprise usage track record emboldens other companies to make use of the ledger. We saw an explosion of start-ups in 2019, and I believe we will see an explosion in activity from these startups in a synchronized fashion, but not until some event makes rapid growth cost-effective.
Carpe Diem
If it is true that one should expect things to progress slowly in BSV, at least publicly, until a sudden acceleration is triggered by a black swan event or some sort of killer app, what is one to do in the interim? A common response has been to take to Twitter and complain about the lack of progress. This isn’t a terrible idea. A little peer pressure to work harder and make more progress can help. However, I fear that toxicity in the present can have the effect of slowing progress today and making it more likely that incumbents like the tech giants reap the rewards of building on BSV instead of early builders like today’s entrepreneurs. Perhaps more importantly, it could be over a year before we see an acceleration in progress. A year full of working to get ahead will be much more pleasant than a year full of bickering about perceived slowness.
For today’s entrepreneurs, the more time between now and a black swan event, within reason, the better. Even though entrepreneurs are forced to conserve equity, work is still being done. Entrepreneurs are increasing their lead and preparing for rabid competition. Look at nChain as one of many examples. This is a company that is working feverishly towards the future. It may even be to their advantage to delay a potential black swan event in order to keep increasing their lead. This will test everyone’s patience, since there is such a strong desire to both see a return to order in the Bitcoin space and to propel the world into a better future. Maybe the appropriate patience could be described as a tragedy of the commons, but for an individual entrepreneur, acting urgently while remaining patient could lead to generational wealth. I, for one, am glad to have this respite to keep learning more about BSV and how it will affect the future before other investors eventually get started from square one. I would encourage others to take a similar approach. I know many already are.