After raising $75 million in financing, here are five pieces of advice for early Web3 projects

Author: Teng Yan, Delphi Digital Researcher

Compiled by: Luffy, Foresight News

I haven't talked much about my life before Web3. But in 2015, I co-founded a health tech AI startup with others (I raised $30 million for this company) with the vision of using data to improve the health of millions.

For six years, I led a key business line focused on mobile consumer healthcare. My team built products from scratch based on my ideas for real users:

• A mobile health coaching app where users can talk directly to real coaches
• A food scoring algorithm that assesses the healthiness of your meals based on photos you take of your food, utilizing computer vision and machine learning technology. We opened the API of this tool to other mobile applications.
• A mobile workplace mental health app that tracks and stratifies employees' mental health risks, helping people stay happy and healthy at work. The app provides guidance and treatment for those experiencing burnout and mental health issues.

But…

Despite our best efforts, these consumer-facing products did not succeed; they ultimately failed.

This experience provided me with rich insights into tech startups and firsthand experience of the dilemmas faced by founders.

Let me share some brief lessons:

Advice 1: Distribution Over Commercialization

Our initial business model was subscription-based, which was necessary given the huge operational costs of our app (including human health coaches).

We leveraged technology and AI to increase coach efficiency by 20 times, but fixed costs remained. I thought that if our product was priced 50% cheaper than the market rate for coaching consultations, new users would naturally come.

However, we quickly realized that standing out in the crowded health app market required more than just a great product; it required a clear user path.

User channel AARRR framework, source: neliosoftware.com

In other words, distribution takes precedence over commercialization.

We started charging for our product from the beginning without clarifying our distribution channels and methods at the top of the funnel. Our growth was slow.

Even if users did not pay, having more users has another benefit: data is often a moat in the tech space. The faster you grow, the more data you collect, which can lead to network effects and help you find the right product feature set more quickly.

Advice 2: High Costs of B2C Business

We targeted the B2C market, but we severely underestimated the resources required.

Unless you are lucky enough to go viral, B2C businesses require significant marketing expenditures to grow and reach escape velocity. This is only reasonable if:

You have ample funding and prioritize growth at all costs (which is more difficult in today's funding environment)

Unit economics fundamentally make sense.

Despite our growth team trying various aggressive strategies, our customer acquisition costs remained high.

Understanding Customer Acquisition Cost (CAC) and Lifetime Value (LTV) is crucial for identifying opportunities and ensuring sustainable growth. The CAC payback period (the number of months required to recoup customer acquisition costs) is an important metric.

CAC vs. LTV, source: paddle.com

We once ran a campaign on Facebook where the cost per new paying user exceeded $150. However, our average user spend was typically only between $60 and $90.

• New users help us improve our product faster
• Achieving economies of scale once a certain size is reached

But negative unit economics are unsustainable, forcing us to rethink our strategy.

Advice 3: B2B2C Business is a Double-Edged Sword

After realizing the limited appeal of B2C and having no more resources for marketing, we changed direction.

Our distribution target shifted to mature companies with a large pool of potential users: large pharmaceutical companies, major insurance companies, and hospitals.

The concept of B2B2C is enticing: build a consumer application but partner with large companies that have established distribution channels. This can significantly reduce user acquisition costs, and winning a partner could mean access to millions of users.

However, in practice, the B2B2C approach is challenging to execute smoothly:

• You need to build features for both enterprise clients and end users, which divides the priorities of the product team.
• In addition to an excellent product team, you also need a high-performing enterprise sales team, which has long and uncertain sales cycles.

But it is not impossible. Some companies, like Omada Health, have done very well in this regard.

In our case, we partnered with one of the largest insurance companies in the Asia-Pacific region to integrate our AI tools into their member application. It was a win-win; they provided new features to users while we were able to commercialize without our own user base.

But soon they wanted more customization on the backend. This required a significant amount of development resources, taking away from our consumer-facing product development.

The result was that over time, we fell further behind our competitors.

Advice 4: Understand the Real Costs of Building an App

Building an app is not a cheap endeavor.

In my experience, a simple but well-made native iOS app costs at least $500,000.

This includes not only development costs but also ongoing costs for updates, bug fixes, maintenance, and user support. I am very skeptical of early-stage startups' promotional materials that promise to build their apps for less than $300,000.

We had an excellent engineering and design team (about 20 people, including product managers, developers, and designers) capable of creating outstanding products.

But the most important aspect is the product vision: ultimately, what should the product do?

We often struggled with which features to prioritize, as there were always too many feature requests and not enough engineering bandwidth.

Business decisions constantly hindered us: to increase revenue, I often prioritized features that helped us acquire specific partners rather than those that would have a direct impact on user engagement and retention.

This ultimately led to a decline in user satisfaction and retention.

Advice 5: Build Something Cool, and the Market Will Come? No

One of the biggest myths in the startup world is that if you develop a really cool product, users will come.

Our experience shows that this is not the case. Success requires more than just a cool product; it requires a clear understanding of the market, a reliable distribution strategy, and a sustainable business model.

This is Not the End

Later, our startup pivoted to focus on B2B enterprise software for mental health. This year, it raised another $45 million. Although I left to pursue my interests in Web3, I remain a shareholder, just no longer involved in operations.

Would I do it again? Yes. The entrepreneurial journey is like a roller coaster, and the lessons learned are worth noting for Web3 projects. It taught me everything I need for success, and I will hold onto them tightly for my next adventure.