In Q3 2022, the company experienced an extremely tough, yet very exciting quarter. From July to September, the crypto markets moved mostly sideways. Initially, crypto prices seemed to be reviving, but then the rally turned into a bear market rally. As a result, many of our customers were frustrated with the ups and downs in the market. Despite the summer months being typically weak for a company, we performed well and avoided many potential pitfalls.
Let me start with the three things I am most proud of during this quarter:
- As a whole, we have a very strong team now, especially with the new executive team of CEO, CTO, COO, CLO, and CFO working well together, and with the additional Vice-presidents, we are reaping the benefits of the added experience without sacrificing Cake’s startup culture.
- Despite cryptocurrency prices plummeting and us making a slight operational loss for the first time in two years, we still ended this quarter with a slight overall profit due to our well-balanced treasury.
- All five major departments executed really well for the first time, which gives me tremendous confidence for the company's future.
Before going into some details, let me highlight three things that I am most concerned about:
- The company is currently making a small operational loss, and I don't expect that to change in the near future, unless the market rallies. With our current expenditure level, our Treasury can sustain us for 5-8 years, but to continue to deliver value to our customers and shareholders, I want us to be cash flow positive again in 2023. And I am confident we can achieve that.
- During the past quarter, our marketing strategy was very aggressive, but the crypto winter will require us to adjust it.
- Recruiting has stepped up massively. However, we still need to improve to ensure that we continue to hire the best. Many other companies have announced lay-offs, but our focus must be on the long term in order to continue hiring the best: http://cakedefi.com/jobs
While we did have an operational loss in Q3, our financials look quite good:
- We have more customer coins on the platform and when measured in US$ terms – despite the crypto price fluctuations – our customer balances remain even.
- In Q3, we paid US$18.7 million in rewards to our customers. That’s down from US$57.5 million in Q2, a drop in 67%. Our customers are still doing better than with most other coins, and when measured in coins, they even gained significantly. Once the bear market turns around, this will pay off handsomely for our customers.
- We were able to reduce our costs drastically due to the reduction in marketing expenses.
- As a result of our strategic treasury rebalancing, we ended Q3 with a positive profit and loss.
- Most of our treasury balances are in fiat, giving us 5-8 years of runway. This gives us plenty of time to get back to being cash flow positive and enough pressure to do so by 2023.
- As we explore going public, I will certainly keep a close eye on our expenses.
During Q4, we'll see a major change in the marketing strategy:
- In spite of the depressed market sentiment, we added more customers in Q3 than any other quarter.
- Many of our paid activities haven't worked well during the crypto winter, so we had to rethink our budget allocation.
- In Q4, we will invest heavily in content marketing including vlogs, blog posts, and much more to grow a thriving audience through great storytelling. The VP of Content Strategy will become a key hire in this process: https://cakedefi.com/jobs
- Our bonus structure will be adjusted to align marketing with cost controls. Consequently, it'll be more attractive to those customers who add value, and less attractive to those who just want to farm bonuses.
- For now, we're keeping our stretch goal of doubling customers this quarter. The hiring of a CMO would be a significant help in achieving this goal.
The product, tech and design team came together really well:
- At Cake Product, we hired two key executives, a Vice-President of Design and a Vice-President of Engineering.
- The Birthday Research team is doing well too, with product managers aligning all teams well.
- With Cake DeFi, we have launched Bitcoin Earn, resurrected the rewards dashboard and prepared the foundation to becoming more multichain, starting with Ethereum Staking.
- Birthday Research provided great open-source R&D services to several communities, as well as developed Wrytes - a decentralized options' protocol. For Q4, we will focus on the institutional offering via Cake DeFi Enterprise, which will be announced during the Singapore Fintech Festival in November. A true game changer!
The operations team mainly focused on getting our new office set up:
- From November onwards, we will have our own floor in the Plus Building in the heart of the business district in Singapore. It marks a major milestone in the history of our company, providing ample space for our company’s rapid growth, meetings, and external visits. The new company’s address is 20 Cecil Street, #18-01 Singapore.
- Despite letting a few team members go due to poor performance, we grew our headcount to 155. More than 100 of them are located in Singapore. As one of the few companies in the space still hiring aggressively, we're expecting to add 15 to 20 team members in Q4 to reach 170 by end of year: https://cakedefi.com/jobs
- Q4 will see a rise in the importance of the enterprise sales function, which was just introduced in Q3.
- In summary, the operations team did an excellent job and I hope the final puzzle piece of VP of People can be added in Q4.
The Legal, Compliance, and Risk teams experienced a relatively calm quarter in Q3. This is a positive development. In Q4, the team will mainly focus on aligning all our licences.
I am well aware that people's investments are significantly down in USD terms due to the general economy’s performance. Nevertheless, I am certain that spring will eventually follow the crypto winter, as this is just a cycle like any other. In the bull run, those who prepared well during the bear market will benefit greatly. Most of our customers agree with that, which makes me very optimistic and excited about the future.