How it all started

The story begins in 2016 when I was 21 years old. Back then, I was working as a software engineer at a European advertising technology company.

I discovered the Ethereum whitepaper and became excited about the potential of blockchain technology to transform the bedrock of our society. Soon after, I quit my full-time job to dive fully into this rabbit hole.

After working with several companies in the space as a smart contract developer and returning home from an internship at IBM Research in Nairobi, I felt it was time for me to found my own startup and take part in the societal transformation caused by blockchain technology.

At that point, my background was exclusively tech, and I lacked business skills and experience. Moreover, I had no idea what exactly I wanted to do.

In late 2017, at a hackathon in Minsk, I met my future startup partner, Vitaly. He was looking for a tech person like me who could help him build an analytics app for Ethereum-based decentralized lending protocols.

I’ve assembled the team, and by February 2018, we were preparing the LoanScan analytics platform for a public release. My co-founder Vitaly went to the ETH Denver conference, where he met the founder of Dharma, an Ethereum-based protocol for p2p decentralized landing. Vitaly got excited about the idea of Dharma protocol (backend) and pitched me an idea for a lending web service built on top of Dharma. I got excited too, and soon after, me and Vitaly took part in the MIT Bitcoin hackathon in March 2018, where the Bloqboard p2p landing platform was born.

From Bloqboard to Linen

We quickly built an MVP that was launched in June 2018 and, later in the summer, raised around $2m from several prominent VCs. We got positive feedback from the crypto community; however, there was no significant loan volume on the platform, so after several iterations of experiments and integrations with other lending protocols, we decided to pivot in the summer of 2019.

Things went better with LoanScan. In addition to the web app with data charts, our team published several research reports on digital asset lending, one of which even received coverage in Forbes.

We’ve quickly tested several b2b and b2c-focused ideas, but none of them found interest in the market. Later, in 2019, one of our advisers proposed the concept of a consumer mobile app for high-interest yield on USD. At the same time, my co-founder had a great idea for a distribution channel – a share-drop campaign. During this campaign, the company gives a small portion of its shares for free to an eligible audience, bootstrapping a loyal community. Any person who lives in eligible US states could claim shares by creating an account in our mobile app and passing the KYC (Know Your Customer) procedure. We launched the first version of the app, called Linen App, in November 2019. We partnered with a leading US-based crowdfunding platform and launched a share-drop campaign in December of the same year. It was a pretty simple app where all you could do was to connect your US bank account and transfer funds to a blockchain-based lending pool that generated yield with variable APY, around 5% at that time.

From Linen App to Linen Wallet

The share-drop campaign was a massive marketing success. During the first 90 days after the launch, we had 3,100 registered users and $76k in deposits.

After the share-drop campaign, the initial traction faded soon after. The interest rate on the Compound protocol went down from 5% to under 1%, making our offer less appealing to users. an outflow of deposits followed shortly.

We realized that we could not build a company and create a strong value proposition based on volatile Decentralized Finance (DeFi) interest rates. We had a choice of either switching to high interest rates provided by centralized fintech companies (e.g., Celsius, which a couple of years later became bankrupt) or making a pivot of our product. At the same time, we felt that our mobile-based digital assets custody solution for individuals might be of big value to many crypto users who had negative experiences of losing access to their traditional crypto wallet with a single unrecoverable key. Therefore, we made a pivot in our positioning and product from a crypto-enabled savings account to a secure and easy-to-use mobile crypto wallet.

In the summer of 2020, we released a new app version with a general crypto wallet's updated messaging and functionality. Soon after, we identified the issue with the Apple iCloud Keychain service that was integrated into the iOS system and served as a backup of users' private keys. Some users reported having trouble restoring the key on a new device after their initial device was erased or lost. To address this issue, we’ve developed a novel crypto custody solution based on Gnosis Safe smart contract wallets, which utilized a multi-signature scheme with three keys, two of which were stored on the user’s device and the user’s cloud drive and the third – on company’s secure key infrastructure.

Breaking point

Despite our wallet's technical superiority over the competition, it turned out quite tough to sell our new product and convince potential users about the benefits of our approach to self-custody. Most of our customers were not tech-savvy and didn’t value our product's technical advantages.

At the same time, we were running out of cash. My co-founder and I had to give loans from our personal savings to the company to keep it afloat. We’ve tried to raise funds from venture capital funds, but we have had no success. Luckily, we still have business connections with the crowdfunding platform team we worked with in 2019. We’ve partnered with them again and launched a crowdfunding campaign on the same platform in early 2021. Due to the excellent preparation work of my co-founder and our colleagues and the favorable market conditions at the time of the campaing, we’ve raised $4.6m of capital from 5102 investors over the course of 8 months.

We’ve added more features to compete with incumbent wallets in terms of functionality, but it didn’t help much. Though a handful of users continued to store crypto in Linen (from the old app), the inflow of new users was minuscule.

A highly enthusiastic and creative marketing person joined us to help us in September 2021 develop a go-to-market strategy, and together, we launched several marketing campaigns and set up a pipeline for content production. However, they brought only a handful of users to the app who came mostly for the rewards, not for the product. It became apparent that we needed to change our approach and dig deeper. We’ve formed a product brainstorming group, and I took the lead as CPO in September of 2021. I had no experience with the product before, so I had to learn everything on the fly.

While our team was busy experimenting with marketing campaigns, rolling out new features, and launching the Android version of our app, our product group carried out multiple surveys and interviews with our user base throughout the first half of 2022. It was a tough debate inside our core team on how to properly balance our vision with the insights we were getting from customer development activities. At that point, our vision wasn’t strong enough, as the theses we had back in 2021 were refuted later on.

Valley of Despair and a New Hope

Therefore, we decided to act on insights we got from users and add features that received the most requests. However, making long-term plans for the company was hard without a solid and clear vision. In May of 2022, when we met in person with my co-founder in San Francisco, we concluded that the best way to proceed is to actively seek potential acquirers who can combine their vision with our technical, product, and business experience in the industry. We have developed an offer for the potential acquirers and utilized our connections to send out the offer to target companies.

In October 2022, the founders of Linen traveled to Bogotá, Colombia, for the DevCon conference. We had several meetings with potential acquirers. Despite numerous conversations with key employees and founders of companies initially interested in an acquisition, this initiative yielded no results.

In spite of this setback, internally, things started to get better: several exceptionally talented professionals joined the team, the numbers started to go up due to promotion assistance from one of our key partners, and it seemed that we were onto something big.

In the fall of 2022, after it became clear that the acquisition was not going to happen soon, we had a conversation that led to a shift in organizational structure: I took over the role of CEO, while Vitaly became a chief operations officer (COO).

Final chapter

As a new CEO, I’ve set the goal for 2023: grow the number of users who store at least $1k in their account 50 times to 2500 users.

For some time, things continued to improve: more high-value engineers joined us, and our team became significantly stronger and more effective than it was when we started. I was really excited to work with such highly skilled professionals! Meanwhile, deposits to Linen accounts and the number of active users continued to grow.

The situation changed in July of 2023: most of the total assets were stored by a few top users, and when the user with the highest balance withdrew all the funds, a sharp decline appeared on our chart.

Soon after, we were ready to release a feature wrapped into a product offer we thought our audience would find valuable. It was a $249 one-time offer for an advanced security setup. It allowed users to connect their hardware crypto wallet as one of three signers of Linen account, providing one of the best combinations of security and user experience available on the market, as we thought back then. However, once we launched it, no one made a single purchase. It was a refreshing experience for the founders. It opened our eyes to the huge mental gap between us and our target audience. It proved that despite having user interviews with our user base, I still don’t really understand how to play in this market of self-custodial wallets and what is needed for our company to grow. It was the last piece required to make a tough decision to finish product experiments and get back to the initiative of selling the company.

This time, we got much further in the negotiations. We got several potential buyers interested in the deal; however, as the discussions progressed, there were more and more concerns from the buyers. The timing for selling the company was not ideal at all, either. Back then, it was the middle of the so-called “bear market” when the overall interest in crypto was low.

At that point, our company still had a decent runway and a strong engineering team. However, eventually, all the deals fell apart. After weighing everything, I made probably the toughest decision in my life: to disband our team, shut down our product, and return the remaining capital to our investors.

Our journey was filled with highs and lows, trials and errors. It gave me and my colleagues invaluable experience and teach us lessons. I’ve picked up several key insights along the way—insights we believe could be super valuable for any entrepreneur or professional navigating this fast-paced industry:

1. Vision Matters a Lot

Vision is the backbone of any company. It directs your strategy and conveys your purpose to the internal team and the outside world. It helps you to resolve disputes in your team easily and avoid major conflicts. A clear vision is critical in the crypto world, where everything moves fast, and sentiment changes overnight. Nevertheless, it’s essential that this vision remains grounded in reality. A vision that veers too far from reality can result in misaligned products and missed market opportunities. In our case, losing a clear vision that resonated with the team led to a breaking point, ultimately leading to the company's demise.

2. Solving a Real Problem Is Fundamental

A common pitfall for many crypto startups is the tendency to address hypothetical issues that don't actually exist in the market or aren't significant enough. Having a compelling vision is crucial, but ensuring that your product solves an acute problem is equally important. Building a product that doesn’t address real needs is a recipe for disaster. As founders, it’s easy to get caught up in an illusion, convincing yourself and others that a problem exists when, in fact, the target audience may not recognize it as a problem at all. To avoid this trap, it's critical to start with a crystal-clear definition of the problem you're aiming to solve. Collecting concrete evidence from people who experience this problem ensures that your product concept will truly offer a solution to a recognized problem that users are willing to pay for with their time or money.

3. Understanding Your Audience Deeply / Getting Inside Your Audience’s Head

In emerging markets shaped by new technologies, a significant gap can exist between the founder's understanding of user priorities and what users truly value. Along our journey, we learned that being close to our target audience, understanding their daily struggles, and seeing the world through their eyes was indispensable for making measurable progress. We thought we knew our users well but overlooked the deeper motivation behind their behaviors. Misunderstandings of user needs, based on superficial insights, led us to make decisions that didn't align with the underlying needs of our users, resulting in stagnant growth.

4. The '10x' Rule for Making Product People Want

In the competitive tech landscape, a new product that's slightly better than its predecessors will struggle to gain traction. Users generally won't switch products for minor improvements; they require a significant reason to change their habits. In other words, if your product is your biggest bet, it should be 10 times better at its job, not just 10% better. For Linen, even though we offered technically advanced solutions like a multi-signature wallet for individuals, it wasn’t convincing. Our target audience already knew how to meet their needs, making them less inclined to switch.

5. Trust is a King

In the world of crypto wallets, trust and brand strength beat everything. Users gravitate towards well-known brands in the industry that have the support of key opinion leaders. No matter how technically superior a new wallet is, it struggles to attract users from established competitors due to the weakness of its new brand. Users tend to stick with brands they trust, and breaking this bond requires more than just technological excellence and improved user experience. We observed that user loyalty was heavily influenced by their current wallets' perceived trustworthiness and reliability.

6. Understand Your Users’ Psychology for a Competitive Advantage

Understanding the psychology behind financial decisions can provide a critical edge in the fintech and cryptocurrency sectors. Those who can grasp the technical aspects of blockchain technology and the psychological intricacies of their user base will have a significant advantage. Recognizing common psychological responses users had to industry events, such as hacks, phishing incidents, and collapses of centralized exchanges, can greatly assist teams in developing effective marketing strategies.

In conclusion, building a crypto startup like Linen taught me that success isn't just about having great technology, functioning application, or secured funding. It's about creating a brand that deeply connects with users and the crypto community on a subconscious level. Achieving long-lasting success in the spaces requires combining a clear and inspiring vision with robust technology, a strong product, and a solid understanding of the market and user psychology.