In the fourth module of the All Things Creation Camp on July 22, Yan Xin, the founder and CEO of EthSign, used his own experience as a case to conduct a two-hour conversation and exchange with 66 entrepreneurs in the All Things Creation Camp S1. EthSign is a Web3 project invested by HashKey Capital, Circle, and Sequoia Capital. In the process of communicating with 250 investors, how to develop a small tool from a vertical scenario such as signature into a comprehensive solution and protocol for performance, asset management, etc. The following is a transcript of some of the highlights of the Q&A:

Wanwu Island: What are your experiences at each stage of entrepreneurship?

Today I will talk about my experience and experiences in the past two and a half years of entrepreneurship, and share with you the stages of product development, my positioning at each stage, and the problems encountered in moving to the next stage. Finally, I will summarize my specific thoughts over the past two and a half years.

I am the CEO of EthSign. We have been doing this for two and a half years. Before that, I was a hardware engineer. I entered the blockchain industry through mining. I started working on EthSign in 2019 and then became a full-time entrepreneur in 2021.

First of all, entrepreneurship is an independent subject. When I first became an entrepreneur from an investor, I thought I had a clearer understanding of how to make something valuable, and I just wanted to make it happen. But after starting a business, I found that it was a completely different matter, such as how to manage a team, how to ensure that everyone's concepts and ideas are consistent, how to develop meaningful products and markets, how to achieve profitability, etc. It is a complex subject, not a linearly solvable mathematical problem.

In summary, I think entrepreneurship can be divided into several stages. First, you need to come up with an idea based on a full understanding of a certain market, and then take this idea to find many experts to realize it together. They may be responsible for various aspects, such as products, markets, front-end and back-end, and then show the prototype to people who may support you, such as VC. The second stage is to take the product to the market to realize its commercial value and find people willing to pay for it. Finally, give back the realized commercial value to those who once believed in and supported you. So this process can be replicated, and to a certain extent, exploring such a set of methodologies can be universal, and it has little to do with the industry.

The second point is that I believe entrepreneurship needs to be driven by passion, because we have to start a new thing or even compete with other companies with a huge gap in resources. We are also required to grow very quickly, and everyone is under various pressures from real life and business interests. This situation will cause your ideas to change frequently, so you will keep asking yourself what results you are pursuing in entrepreneurship. For example, if you think entrepreneurship is the best way to achieve financial freedom, you may soon find that it is not necessarily the case, because maybe in a bull market, others are spending money on investment, but you are spending time on product research and development and team management, which will definitely delay your ability to make money to some extent. But on the other hand, entrepreneurship is actually the best way for us to see the problems of the world and propose a solution to change it. This is what I think is the core of entrepreneurship that needs to be driven by passion.

The third point I think is very interesting is that when I was making the PPT yesterday, I thought that starting a business is like a smuggling. You only have a vague concept of the destination you are about to reach. You only know that the destination is beautiful, but you don’t know what the specific path is. This place is not visited by anyone else around you. Even if you have other people’s experience, it is impossible to completely copy it. You still have to rely on yourself to find a few brothers who are willing to charge with you to explore. Maybe you will capsize halfway, maybe you will reach the destination you expected at the beginning, or maybe you will reach a place completely different from what you expected. This process is very much like smuggling.

Wanwudao: How does EthSign discover market opportunities? And how does it find the right product positioning?

Back to the process of our own entrepreneurship, the first stage was actually a pure tool. We did this project when we participated in a hackathon in 2019. At that time, everyone was still working part-time. I also worked in VC and my partner was also studying for a master's degree. We found about five engineers to participate in the hackathon together. At that time, we wanted to verify whether decentralized storage could be used, so we came up with a lot of ideas based on this. One of them was EthSign. We defined it as a pure tool. I also like this kind of tool. The interesting point is that it is a single function to some extent. You have a clear function to solve a specific problem. You should be able to describe it clearly in one sentence. For example, we are a decentralized electronic signature platform.

At the same time, I think that in the early stages of a project, it is important to find infrastructure and communities that you can rely on. For most entrepreneurs, we use new infrastructure rather than creating a new infrastructure because it is too difficult, so we try to stand on the shoulders of others to take advantage of the situation. Why do you have opportunities to start a business? It is because new infrastructures are constantly emerging. To capture value, they need enough applications and user-friendly interfaces. These opportunities are actually reserved for many entrepreneurs. For example, Ethereum is a very stable, fair, and censorship-resistant chain. It is a very powerful infrastructure. You can make any innovation based on it. For example, OpenAI has also become the infrastructure for AI, and many people have started secondary development businesses on it.

In addition, you also need to find the target community, that is, which community may have the largest audience for your product after it is launched. You can even join this community at the very beginning to co-create with its members and verify your needs. This can help you save a lot of costs and detours and avoid working in isolation.

From the name, EthSign knows what we do. In the initial stage, our goal is to pursue product completion. We hope that our products are simple, with neat boundaries, and are open and integrable enough so that everyone can access and use us, so that we can be put into the Lego of this ecosystem. So at that time, we were a completely decentralized application based on a lot of underlying and middleware. We didn't have any servers, and even our code was running in decentralized storage. Our products were also relatively simple. At that time, we were crazy about financing with a valuation of 3 million in 20 years, but we kept failing. Maybe it was because Web3 was not very popular at that time, so everyone was not willing to pay for it, but even now our positioning has not changed. We still hope that it is a very clear tool to manage your protocols and assets.

At that time, investors thought that our product had a wide horizontal scope. Although it looked like just a signature agreement, it could be used in scenarios such as financial lending, house leasing, and personnel employment. We needed to think about from which angle to go to the market, and whether we should provide services for all scenarios on one platform, or only select a few scenarios vertically. We also needed to think about how to build a moat and how to obtain dividends and capture greater value through the powerful infrastructure we rely on.

Even in the early days, many investors said that I could find someone to make this thing in one or two months. I think they are right. After all, we are an immature startup company, and we are definitely not as good as those companies with mature experience and engineering research and development capabilities. So I was thinking about how to capture more value in the Web3 world, or in other words, how to get financing under such competitive conditions. So here the idea has changed. My idea was very simple at the time. The best part of blockchain is its public and private key accounts and smart contract system. We use the account part very well and use it for signatures. Can we also use smart contracts, for example, to execute the terms in the contract? Then we think this idea is very ideal. Although it seems that the contract is customized for thousands of people, it can still be templated behind it. After we find the scenario, we start from here to create a clearer, transparent and efficient market.

So we started to turn the EthSign contract signing and management process into a product last year. This year, we are thinking about the next step, how to move towards actual business and a larger market. For example, the problem I have been struggling with before is that some investors asked me what your business model is and how to make a profit. This is a very difficult question to answer for early startups. You may even think that we don’t need revenue at all because we are doing a protocol. TCPIP doesn’t have a business model, right? But is it really like that? The second question is whether to serve people outside the circle or just use it for people inside the circle. How outsiders come in has nothing to do with me. That is something Vitalik needs to consider. Another idea is that outsiders don’t come in because the infrastructure is not mature enough and is not ready for mass adoption, so we will wait for the technology growth curve to arrive in two or three years, and they will come to use it themselves, but is it really like that?

For most of us, we are a startup with our own products and value capture channels. If we don’t have revenue, one billion will become a huge bottleneck for you, because we have seen that companies with a valuation of more than one billion in the last round all have very clear revenue. If a very complex and exquisite design does not have a business model, it can only be said to be a work of art rather than a product.

The second question is whether to serve outsiders. I went to zuzalu in Montenegro some time ago and communicated with many people. I suddenly found that after working full-time on Web3 for so many years, I was completely different from their discourse system and it was difficult to communicate. I think meaningful things, whether account abstraction or zkevm, are difficult to explain to others. I don’t know if you have this feeling that it is difficult to explain to outsiders what the value of your technology is. This is also our problem. For example, those who do biotechnology anti-aging and AI large models have very clear and simple value. You can explain it very clearly to anyone, but many people think that mass adoption is not my business. I just need to do my current work well and someone will come in naturally. I want to say that this idea is naive, because there will be competition for talent and capital between industries. For example, AI is popular and many people are doing AI and investing in AI. Naturally, AI can create more value, and Web3 will definitely enter a bear market. This bear market is not only due to the outflow of capital, but more to the outflow of talent. If people in an industry continue to only want to do well in front of them, then this industry may die. We still have to pursue the value of technology to be simpler and more intuitive, and pursue bringing in people and money from outside the circle.

So this year we will also do some things that we didn't want to do before, but are very practical. For example, we have cooperated with a world-class law firm like Cooley to launch a contract library, which covers most of the agreement templates that a startup team needs in the early stages. We also have a very clear product development path. The agreements that everyone is using now are highly customized. We first provide paper templates that everyone can accept, so that everyone can gradually get used to this fixed rule, and then we only change the parameters inside, so that in the future when an agreement is used enough and the degree of templateization is high enough, we can convert it into a smart contract for execution. So in the long run, I think all paper agreements will disappear, and we want to make this product more useful and actually solve everyone's problems, rather than just thinking it's cool.

How can we go beyond the circle to serve more people? We started from Ethereum, but it does not mean that we only serve Ethereum. We will strive to serve more ecosystems, such as different chains and private key formats. We have also submitted EIP to support everyone to use DID as identity signature, not just your private key. We have also made password saving related functions to help users better keep their accounts and contract data. So we will do a lot of things to help users, instead of letting users cross the threshold to learn.

The above are some of our changes and progress as of today, but my dream for the future is to become a real protocol. We need to use the protocol to realize its network value and cover more scenarios and users. In essence, the root of many businesses is traffic. For example, our current matchmaking business is the traffic business of investors and project parties. The problem with any traffic business is that it cannot serve everyone. The Internet is not flat. It is because different countries, languages ​​and cultures have independent circles and traffic platforms. We hope to become the public infrastructure of these traffic platforms. The advantage of becoming a protocol is that it will have strong interoperability. This is the highest holy grail in the field of encryption or Ethereum-based smart contract platforms. You only need to write a few verified smart contracts and they may be used in any related scenarios. So this smart safe can also be used in scenarios such as family trusts. This is why it must be protocolized. We must open up our capabilities enough so that people with needs in other scenarios can integrate our services at a low cost. We will accelerate our exploration in this area in the future.

Wanwudao: From the perspective of a senior, what suggestions do you have for founders in the process of track and business verification?

Finally, my thoughts: first of all, don’t get too hung up on the idea stage. To be honest, there aren’t that many choices at the beginning of a business. First, look at what cards we have, what we are familiar with and what we are suitable for, and then look at the corresponding market to find a specific problem. Don’t think about finding a big problem at the beginning, as if solving this problem can capture hundreds of millions of dollars in value. This problem does exist but may not be suitable for you, so you just need to solve a small problem at the beginning. Second, ideas are worthless. Investors receive a lot of ideas every day. What they want is execution, to truly implement this idea and bring it to market, so investors invest in our execution rather than ideas.

So many people get too hung up on ideas at the beginning, just like when designing a logo, they hope that it can carry all our dreams, but this is impossible. Just choose one at random. People's good impression of this logo actually comes from your continuous investment in the project, not whether the logo itself is good-looking enough or meaningful enough.

To be honest, at the beginning, we also wanted to make a Web3 version of DocuSign, but in fact, it is not that difficult for DocuSign to add a private key signature, but it can't do so because this thing is too new and may have a great impact on its core business model and supervision. As a listed company, management's decision-making is often not for innovation, but to maintain current revenue. This is why Volkswagen and BMW cannot create Tesla. I don't encourage us to define it as something in Web2 in Web3. Although it is easier for others to understand, you will ignore a lot of valuable things because of such a definition and limit your field of vision. What is truly valuable is native, rather than moving what others have done in a field and doing it again.

It means start low and move fast. As I just said, start with some small things at the bottom, but make sure you do it fast enough, instead of thinking about grand things at the beginning, trying to raise a lot of money, and hiring a lot of engineers to realize the idea. Everyone should quickly implement its MVP from a very small idea to verify the market, and then quickly iterate and update based on feedback. So don't think about what you want to do too complicated at the beginning. After a lot of effort, you finally find out that the market does not need such a complicated thing, which leads to a huge waste of resources. We can now complete the process from idea to MVP within one month. In addition to the engineering team, we also have a prototype team that specializes in MVP concept verification.

Finally, I suggest that you spend some time visiting places outside of China and the United States, because our infrastructure in China and the United States is already too vast and too mature, and it is difficult to understand what the market demands of truly developing countries are.

Wanwudao: Everyone thinks that your financing is very successful. What experiences can you share with us?

Investors do not invest when the bull market is on the rise, but start to invest crazily when the bull market is on the decline, because the primary and secondary markets have a lag effect, which is about half a year to a year. For example, LPs will invest in GPs only when the bull market comes, and GPs will invest in projects only when they have money. Our own financing process was very bumpy. It took us three months to get the first round of financing, and then we got a total of 600,000 US dollars in financing. Together with our own money, we supported the bull market for eight months. However, at the peak of the bull market, we had no time to speculate in cryptocurrencies, so we could only use our own money to support it for another 5 months before we got the investment from Sequoia. This process was very hard. I can say that I should be the institution that has met the most investors. I have met more than 250 investors in total, at least 2 or 3 investors a day, for a full six months.

This process is very painful, but also very rewarding. On the one hand, you can regard it as an opportunity to learn English for free. After you have met 100 investors, your English will be very fluent. Secondly, investors will also give you a lot of feedback. You have to prove that your things are valuable. Investors may become bad guys who deny you and battle with you, so in the process of defending yourself, you are also thinking deeply about how to solve the questions raised by investors. What is more important is that you must keep in touch with investors. The other party may not invest in you, but you must ask clearly why not. Don't just stop asking because most investors say we'll wait and see. It is important to keep asking until you get feedback. Don't be afraid of being embarrassed. Then if there is any new progress in your products and business, you should also be able to synchronize with the investors you have talked to before.

Finally, don’t respect investors’ opinions too much. Many investors in traditional industries have run successful listed companies themselves, and many of their suggestions are valuable experiences. However, many web3 investors have not run truly successful projects, and their opinions are more from an investment perspective. So don’t pay too much attention to their suggestions. The best thing is to keep doing what you really want until you get results.