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One of the popular coins in Japan, NEM, saw itself in some pretty serious financial trouble. In January, NEM foundation announced that they werea month away from going bankrupt due to the lack of funds attributed to poor execution and the ongoing crypto winter. The team now is looking to raise more money while also lay off a considerable portion of their workforce to stay afloat.
NEM is not a widely known coin, but the failure of its foundation to manage its funds is a lesson that many projects from around the world can learn from. Unfortunately, this is also foreshadowing of many projects with declining funds that will be uncovered later this year, as many projects (with many also in Asia) raised in Ethereum and kept the fund as it is.
This one particular aspect of running a company where I think many crypto projects will unfortunately bump into, given the nature of their often decentralized teams and the lack of leadership experience of many founders: “We saw efforts being duplicated, and inconsistent metrics of success. We saw very little accountability for funds and questionable ROI, leading to a burn rate of 9 million XEM per month. In terms of running an effective organization, the existing structure failed.”
With crypto winter going for some time, it should be one of the top priorities for project leadersto manage their treasuries wisely and stay lean.
Projects like NEM who run out of money may attempt to raise money again, but this time, they are dealing with an existing community that has been burned once, and predominantly a group of smart money investors leftover in the remains of this bear market. Mr. Market won’t be in their favor the same way again.
On the onset of this New Year, after a financial audit, issues such as the company is currently functioning at low XEM and fiat funds, surfaced.
When the new council arrived on January 1, 2019, we opened the books and saw the results of 2018. We saw a lot of talented people who were working hard, but not aligned with the same goals. We saw efforts being duplicated, and inconsistent metrics of success. We saw very little accountability for funds and questionable ROI, leading to a burn rate of 9 million XEM per month. In terms of running an effective organization, the existing structure failed. Maybe that didn’t seem like a big problem when the XEM price was high, but it’s a very big problem as we seek to sustain a viable organization in the ‘Crypto Winter.’
All these issues gave a loss of 9 million XEM per month, which is almost equal to $350K, or over $4mn in a year. The situation was so bad in that the foundation could only run for the next 30 days if the current reserve were to be considered.
As a result, there has been ongoing restructuring and budget cuts. The aim is to “heal” the 9 million XEM per month expenditure by at least 60 percent. This will be achieved by currently cutting all the partnerships and projects on hold. Also, there will be a ‘planned layoff’ of 150 staff members.
There are some fundraising plans too to mend the funding gaps. The Foundations plans to ask its community to pitch in for the funding. The foundation aims to raise 160 million XEM which is almost equal to 6.2 million U.S.Dollars.
The Foundation said that it is aiming to refresh and restart from scratch. There will be a clear shift from ‘regional teams’ to ‘product focused organizations.’ These will have added traditional lines of reporting.
The Foundation also aims to become a more traditional organization with a centralized business model which is driven by revenue and product development, as per the reports from Cointelegraph. The foundation wants to move away from the label of ‘driven promotional organization.’
There will be seven product heads namely — chief technology officer, chief of product management, chief financial officer, chief business development officer, chief operations officer, chief marketing officer, and chief revenue officer. The employees of the NEM Foundation and contractors will now report to one of the seven product head.
Further, these product heads have to report the ‘metrics and deliver ROI’ directly to the council and the community. Accounting standards will be followed. And the funds that are spent will be under the supervision of the head of finance CFO of the NEM Foundation.