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The Alchemy of Startups: When & How to Pivot

Chaos

What do you do when the company you sacrificed your career, savings, gratification and personal relationships for is on the verge of collapse?

This was me deep in thoughts at 4 am when an investor group who gave us an 80% guarantee to invest $500k said they wouldn’t be investing anymore. Another investor group who had already sent us a term sheet for a $10k investment also pulled out. We were on our last $1000 runway, I had bills and salaries to pay.

For the first time since I clocked 21, I was flat broke, I only had the exact amount of my rent in my savings account. I made a huge bet, I saw the opportunity of making $500k in revenue annually and I invested $40k into this project but it didn’t turn out the way I predicted

We were in chaos and our business was a mess.

‘In the midst of chaos, there is also opportunity’

Sun Zhu

Alchemy

The definition of Alchemy is the art of transformation, inner liberation, and change. A great example of alchemy is distillation, the process of separating a mixture into different components. It is the process through which alcohol is made. For example, if you take potatoes, mash them in a closed container and place it on fire, then create a pipe opening for the steam to escape, run the pipe through cold water, the steam will collect into a liquid at the end, that liquid is a pure alcohol they call vodka

We had to go through an alchemy process to be reborn. One of the first things we did was to review our business model. Is our product something we can charge for every day, week or month?

Our platform, Gateway was a gamified learning and product discovery app for the web3 ecosystem. People can learn, earn rewards in tokens & NFTs and discover web3 apps. The problem with what we built was 1) There was no frequent product usage, we had 3700 users but less than 200 monthly active users 2) The rewards system attracted bad players 3) The value proposition was not strong enough to charge users frequently 4) The web3 apps willing to pay to be discovered needed frequent users that will get exposure to their products

To make the case worse, we saw about 3 other startups doing exact same thing as ours who had recently shut down. I reached out to Jason Curry, the founder of continuum.xyz and he told me – ” Hi there, we’ve actually shut down Continuum bc we were not able to generate revenue before running out of our funding unfortunately. Happy to help you if I can “

Reborn

I knew we had to pivot into something else using our existing infrastructure. Understanding our shortcomings, we studied what we have built, and how we can leverage this to scale and deliver an experience worthy of paying for. We did intensive research and studies. After about 3 months, we finally figured it out

Our platform has NFTs, an NFT marketplace and a gamified experience. These are all elements that could support gaming. Mobile gaming is a $300B market with over 2.5B mobile gamers in the world, about 300M of those are in Africa. The gaming market in Africa was estimated to hit $1B in revenue by 2024 and $300M in revenue was made from the Nigerian market alone in 2023.

The problem with gaming is people contribute thousands of hours playing and accumulating in-game assets that don’t translate to real value. With NFTs, gamers have the opportunity to resell their in-game assets like weapons, power-ups etc in an open market. How can we create a financial economy for gamers within games? These are all pointers to a market and audience we can serve with our platform.

That was it, Gateway was going to rebrand and we were now going to be an NFT-powered gaming and learning platform. Users will learn, earn NFTs and use those NFTs to play casual games. We can increase product usage & frequency, charge through NFT buys, points purchases and fees on NFT mints etc

We also reviewed the feedback all investors gave us. We learnt that most investors especially in the web3 ecosystem were less likely to invest in startups for equity, they wanted a token investment as it allowed them to exit their position in 5 years due to the Liquidity of tokens in the market.

We already had tokens powering the rewards system on Gateway. So we decided we were going to launch a native Gateway token $GATE. This will allow us to accrue value on the platform to ourselves, not another token ecosystem and allow us to raise the capital needed to scale

With these two new directions after going through fire, it was much better and we were confident with moving ahead with our vision.

We secured funding from an L1 blockchain and were given another fresh start to try again. One of my favourite quotes of all time is

If it was easy, everyone would do it

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