What's life like for a bitcoin startup? A panel of entrepreneurs -- including Peter Vessenes, founder and CEO of Coinlab; Fred Ehrsam, co-founder of Coinbase; Anthony Gallippi, co-founder and CEO of BitPay; and Charlie Shrem, co-founder and CEO of BitInstant -- tackled that topic during a panel discussion Sunday at Bitcoin 2013.
The audience was about one-third entrepreneurs hoping to get funding, with a few would-be investors scattered about here and there. The entrepreneurs on the panel, all of whom got started when most potential investors had never heard of Bitcoin, expressed a bit of envy and wonder at the idea that they were, just a few years later, in a room packed full of people who wanted to invest their time and money in the cryptocurrency.
All the panelists warned would-be entrepreneurs not to spend too much of their time and energy pursuing funding at the expense of working on their product.
"It's very easy, especially in the early days when you have very little manpower, to get wrapped up in a bunch of meetings," Ehrsam said. "At the end of the day, you have to make a product that people want to use."
"Every hour that you spend working on term sheets and [with] the banks ... is time you can't spend working on your product," Gallippi added, noting that BitPay was self-funded for the first 18 months of its existence.
Vessenes said that, in hindsight, he believes he spent too much time thinking about how to calm down potential investors about Bitcoin's potential risks. He should have spent more time focusing on what he really wanted to do, he said.
The hype that comes along with a major funding announcement can also be distracting, Shrem pointed out. That's why BitInstant put off announcing the funding it raised last fall until just a few days ago, he said.
Raising money for the first time can be nerve-wracking, Shrem added.
"[BitInstant] is my second startup," he said. "My first startup, we didn't really raise money. As I'm on the phone with VCs and they're spewing all these [financial] words, I'm Googling what these things are."
He continued, "At first there was no money in the Bitcoin space, it was really hard to raise money. I literally had to get the first $10,000 from my mother to start BitInstant. What I tell any startup, especially in the Bitcoin space, when there's money coming at you, take a day or two [to think about it before accepting] ... It's kind of like a marriage on steroids."
Early investors often put more than money into a young company -- they can also be valuable mentors, Vessenes said.
"I have time and attention from people who are much more experienced than me," he said. "Any fundraising you're doing is buying attention from rich people that are successful."
One important prerequisite to getting funding for a Bitcoin company is to have the technical expertise to build the product; so entrepreneurs who don't have the technical chops themselves should partner with someone who does, the panelists advised.
On the heels of that advice, Shrem revealed he has never met his "super genius" co-founder and CTO Gareth Nelson in person. They met online.
"That's insane!" Ehrsam burst out. "But kind of awesome."
One audience member asked what kinds of ideas new Bitcoin entrepreneurs should be exploring. The panelists urged entrepreneurs not to start "me-too" companies that duplicate ideas that already exist.
"Between now and next year at this conference, some totally new idea will have made someone $50 million, and we'll see 10 of those me-toos come along," Vessenes said.
To find that next great company, Ehrsam suggested, entrepreneurs should be "looking at how Bitcoin can solve major pain points in the global economy."
Among some of the panel's other suggestions: Build an SMS service so people can quickly convert their savings into bitcoins when their local currency is spiraling down, build an app to quickly access paid online content, and find a way to facilitate remittances to help overseas workers send money home to their families.
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