One week after his startupâs abrupt closure, Buttercoin CEO Cedric Dahl says the wider community should be careful to learn from his experience at the helm of the US bitcoin marketplace.
Despite accruing an impressive list of investors, including Google Ventures, Centralway Ventures and Y Combinator, Dahl suggested that it was Buttercoinâs affiliation with larger investment firms that ultimately left it less able to adapt in a changing bitcoin ecosystem.
He told CoinDesk:
âThe big lesson is that you cannot rely on venture. You have to make a product that is self sustaining.â
Founded in 2013, Buttercoin raised $1.3m in funding, capital that helped make the startup âone to watchâ in a crowded market. However, in hindsight Dahl wouldnât have tried to raise venture funds at all, he said, calling the decision a âtactical mistakeâ.
âThereâs much more seed money out there. Itâs much easier to raise, whereas with venture, if youâre not able to get it, the funding is over. With seed and angel money, you can keep going,â he continued.
Since the move, some of the companyâs more high-profile customers have already reported switching marketplace providers, with MegaBigPowerâs Dave Carlson entering a business relationship with Boost VC-backed startup Hedgy.
Buttercoinâs last full day of operations was 10th April, with employees scheduled to depart at close of business on 15th April.
In interview, Dahl talked at length about his regret that he didnât bootstrap the company, instead trying to raise âa significant amountâ early on.
âWhat I shouldâve done is really start with a fraction of what I would actually need and once you have enough demand, raise more,â Dahl said.
Still, Dahl warned that having traction in the marketplace isnât everything, as he believes Buttercoin was able to achieve an active user base despite opening to the public roughly five months ago.
âAt the end of the day, we built a great product that had real growth that was growing between 10â25% per week,â Dahl said.
Dahl also suggested the decline in the price of bitcoin was a factor in funding, noting that his initial fundraising took place when the price of bitcoin was at or near $1,000, compared to its current value of $220 at press time.
Dahl also discussed the need for bitcoin industry executives to strike a balance between âreality and perception,â noting that both are equally important when dealing with potential investors.
âPerception is important,â Dahl continued, adding that he expects companies to raise funds without introducing products because of this factor.
The most likely targets for this funding, he suggested, would be first-time bitcoin investors or firms looking to capitalize on the big opportunities in the space. Further, he said that investment is likely to be split between large venture rounds and smaller seed investments, though all in line with an overall trend of consolidation.
âIf you look at the money this year, 50% has gone to two companies. Thatâs a rough figure and I think youâll continue to see this distribution where fewer companies get more.â
Dahl went so far as to predict an environment where the number of bitcoin wallet providers is whittled down to a handful of well-capitalized winners.
âI think that youâll find thereâs going to be a really big consolidation in the space,â he added.
Despite the formal announcement, Dahl suggested that he wasnât ruling out a last-minute bid to save the company or secure an exit for investors.
âWeâre trying to do the best we can by our team and our investors, weâre pursuing every option possible to get compensation,â he said.
Overall, Dahl expressed his thanks to his team which he commended for handling both the scaling up, and subsequent winding down, of Buttercoin professionally. Going forward, Dahl indicated he would also seek to make himself available as a resource to aspiring bitcoin entrepreneurs.
Dahl concluded:
âAt the end of the day, Iâm super proud of the team we put together and the product weâve built.â
Caution tape image via Shutterstock
