Sequoia Capital: How Should Founders Navigate a Crypto Bear Market?
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Sequoia Capital: How Should Founders Navigate a Crypto Bear Market?
Excessive pessimism and complaints are meaningless, but neither should one harbor too much hope.
Navigating Web3 tides with focused insightsWritten by: Michelle Bailhe, Sequoia Capital
Translated by: TechFlow intern
If you're still fixated on the red sea of falling K-lines and wondering what to do next, here are some thoughts applicable to crypto—drawn from 50 years of experience at Sequoia Capital.
First, embrace reality. Cryptocurrency has survived many winters before, but it's never faced a global macroeconomic storm. Bitcoin was launched during the last global financial crisis in 2008, and crypto has largely evolved in an environment where U.S. interest rates hovered around 0%.
Over the past 14 years, crypto has grown tremendously. In previous cycles, it lacked the complexity and diversity of market participants (both individual and institutional) that we see today. Never before have users, developers, and regulators paid as much attention as they do now.
So the truth is: this is the first time we (Sequoia) have entered crypto—but crypto has already entered winter. This bear market will resemble past ones, yet many critical aspects have changed.
Maybe you’re a founder whose token has dropped 80%, or perhaps you haven’t had time to rebalance your wallet full of tokens across various sectors, or you’re wondering what’s happening with your customers… Regardless, excessive pessimism and complaints are unproductive, but so is clinging to excessive hope. You're in a bear market—so what should you actually do?
1. Don’t panic—make a plan. Now is the time for “diamond hands,” not just for your personal portfolio, but also for your team/company/protocol. Think deeply this month, act decisively, and stay the course. Prepare for the waves ahead.
2. Recognize that the funding environment has changed. Venture capital isn’t readily available anymore. Manage your project’s spending accordingly.
3. Talk to those who’ve truly been through downturns and emerged stronger. Most crypto investors today haven’t experienced such conditions. Avoid listening to investors who’ve lost money and become emotionally unstable.
4. Ask tough questions. First: Do we actually have product-market fit? Many founders focus on building products, so asking this feels especially painful. In prior environments, abundant incentives masked weak product-market alignment.
5. Then ask: Do we have a sustainable business? Rising token prices aren’t a business model. Native tokens for securing L1/L2 networks are a different case. If you’re building applications and relying solely on VC funding and token issuance, this question becomes critical.
This doesn’t mean you must immediately monetize your app, but you should analyze your sector and create a strategy. Crypto/Web3 is about better aligning incentives and rewarding users/creators—not defying economic fundamentals.
6. Invest wisely. We can usually cut around 10–20% of spending on sales & marketing (S&M) and general & administrative (G&A) costs. When done right, this increases efficiency rather than reducing it. Most crypto teams are lean, but there may still be redundant expenses or initiatives. Focus precious energy on what matters most.
7. Stay grounded in core R&D. This is one of the most important lessons Sequoia learned from 2008: tighten belts elsewhere, but double down on core product development to widen the gap between you and your competitors.
8. Hire a great CFO. The CFO role is arguably the most underappreciated in crypto. Honestly, I don’t know why. A good CFO won’t just sit there telling you not to spend—they’ll help you invest wisely. Find a strong CFO as soon as possible.
9. Build a path to sustainability. You need a sustainable business trajectory—one that doesn’t depend on VCs or retail traders propping up your token price.
10. Seize the opportunity. The strong get stronger. As weaker companies begin to falter, dominant players will poach their top talent, knowledge, and users. This is a crucial moment to expand your advantage and solidify market leadership—but only if you survive long enough to seize it.
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