Dragonfly's Open Letter to Portfolio Founders: The Industry Narrative Has Changed Dramatically, Surviving is More Important Than Anything!

Original Author: Shenchao TechFlow

Dragonfly Capital mentioned in a communication letter sent to the founders and partners of portfolio companies:

I hope you stay safe and sane during these turbulent market conditions. You and your loved ones have likely been heavily exposed to the cryptocurrency market, and I want you to prioritize your well-being and health.

Macroeconomic conditions are deteriorating in the worst possible direction, both for cryptocurrencies and growth assets.

We are long-term investors, and we know you are building for long-term growth, but you must assess the current market situation. In such a market, there is an urgent priority: survive and ensure that you and your team can last until the market is ready for what you have built.

Every bear market brings difficulties and challenges, but those who can weather the storm can reap the next harvest, creating generations of teams and products.

If you are raising funds, please complete your fundraising as soon as possible and retain the talent you need to build during this downturn. If you have recently raised funds, now is the time to focus on what matters and cut expenses, including product direction and personnel. If you have over-hired, allocate your resources to key talent and product areas, and let go of others.

Focus is at the core of the game. The history of technology is filled with teams that had the right ideas at the wrong time, who did not see their visions realized. I do not want to see this happen to any of you.

I say this not to scare you— you should not fear this moment, but face it seriously and gracefully.

The entire industry has just undergone a shift, and you should reset your assessments accordingly. Do not rely on old assumptions; we may see a significant change in how cryptocurrencies operate.

Here’s what we expect to happen:

1. Capital markets will slow down, and many transactions will be unable to complete until investors begin to digest the new price levels.

2. A large influx of talent will enter the market in the next 3 months, and the bargaining power between talent and companies will shift closer to normal.

3. There will be strong calls for regulation, some of which may be genuine, but there is more motivation than ever to move innovative products overseas.

4. The market will reduce speculation for a period, especially as retail investors are no longer driving as much capital flow, many narratives will be reset, and we will not see the same old stories play out.

Each of you needs to internalize this in different ways. Your team needs to see you convey confidence and direction, letting them know you are doing well, and they will be well too.

If you need us to do anything, or just want to talk, we are always here for you, whether the times are thick or thin, green or red. We will work with you because we believe in this industry and because we believe in you. We look forward to continuing to be your partner in the days ahead.

------Tom, Haseeb, and the Dragonfly Team