SBF, and his company FTX’s related bankruptcy, has had ripple effects across the crypto market, into regulators’ offices, and into Capitol Hill hearings. Republicans and Democrats alike are hungry to use the conviction as evidence that the industry is dangerous to consumers and can’t manage itself. The recent evidence that Hamas raised $130 million in crypto to fund the October 7 attack is adding fuel to this regulatory fire.

The crypto industry’s future may now hinge on its ability to convince the public and Congress that it offers a net benefit to consumers. Here’s how crypto can use classic crisis communications for the unique challenge of turning congressional and regulatory scrutiny into positive branding and credibility.

First, transparently acknowledge the industry’s trust deficit. Bankman-Fried’s conviction comes after he propped up companies, after he affected the 2020 elections, and after he lied to investors and consumers. Congress isn’t going to have patience for “less regulation” arguments after fielding “do something” calls from constituents who see an industry that has embezzled billions in customer funds and wiped out life savings. On top of that, revelations about Hamas carry more weight than libertarian dreams of a decentralized currency utopia.

Second, share relevant and proven good news. For example, crypto’s self-regulating nature and record-keeping functionality exposed the millions Hamas raised in Bitcoin and forced the terrorist organization into a self-imposed exile from cryptocurrency. Crypto also offers millions of people in countries which lack financial infrastructure access to the same type of capital and banking services first-world economies take for granted. Finally, show how crypto’s innovative capabilities have helped banks and other mainstream institutions serve millions of consumers’ financial needs.

Third, take prompt action toward proactive solutions. This can be crypto’s emergence from a Wild West industry into one that combines innovation with stability for consumers.  For this rebranding to be credible, Washington needs to see fewer twenty-somethings claiming to change the world and more adults who understand the consequences of illegal activity and market crashes. One approach that seems to be working in Britain is led by an industry association named CryptoUK. The organization that is working with politicians and regulators to pull together rules of the road, including a proposed Code of Conduct that includes consumer protections like segregating consumers’ non-crypto currency from company funds and making customers whole in the event of a crash.

The law as it stands held SBF accountable, but new self-regulating organizations, or SROs, operating under government regulators and establishing guardrails for the industry would be a forward-looking way to prevent bad actions on the front end. The Brookings Institute argues that SROs have proven track records within the financial system and would not require Congressional action for implementation.

The story of crypto is being written in Washington right now. Last month, Senator Elizabeth Warren (D-MA) led 101 other members of Congress, from both houses and both parties, in asking the Treasury Department what measures it plans to take to keep terrorists from financing their activities with crypto. And SBF’s conviction will undoubtedly result in many other elected officials and regulators salivating at the chance to nail others to the same prison wall.

Crypto needs to tell a story of success that resonates with its (many) opponents in Washington. It needs to show how regulatory capture threatens American innovation and hinders the poor’s ability to build wealth. It will also need to show contrition and a commitment to reestablishing consumer confidence in a way that mainstreams crypto as a tangible financial asset. Otherwise, it’s at risk of being over-regulated – and the opportunities it creates will go to other countries.

Dustin Siggins & Kelly Ferguson originally published this piece at TabbFORUM.

But as FTX’s collapse continues to reverberate across Congress, markets, and court rooms; Alphabet, Twilio, Amazon, and other top tech firms lay off huge percentages of their staff; and investors turn a more critical eye toward tech start-ups, companies can’t rely on investors to provide the same historically accessible money with long profitability or acquisition runways. Start-ups must go back to traditional business fundamentals to prove that they take investor money as seriously as the investors themselves.

What’s going on in the investor market?

From social media and phones to streaming and cryptocurrency, there hasn’t often been a better place for investor money than in tech start-ups. Some of those start-ups have turned into household behemoths – and in 2021, the market caps for companies like Amazon, Microsoft, and Facebook were each larger than most of the world’s countries’ respective GDPs.

However, as tech struggles become daily stories, investors have become more selective. Alphabet missed its revenue and profit projections in Q4 2022, and recently laid off 12,000 staff. Facebook has been notoriously struggling to find new ways to grow for several years, and Salesforce’s layoff of 8,000 staff comes as the company has not provided a forward-looking revenue projection for the first time in its history.

It’s not just the behemoths. The Associated Press reported in January that the annual CES conference brought the traditional 3,000 start-ups and corresponding investors. But while past years highlighted pie-in-the-sky ideas and companies, this year’s conference was much more about showcasing deliverables, profits, and other business fundamentals traditionally valued by investors.

Investor Tien Wong, who founded the world’s largest monthly pitch event CONNECTpreneur, told us that the entire investment community is changing. “There is still plenty of investment capital sloshing around, [but] investors are scrutinizing investments more. They are doing deeper diligence on risk factors and investment considerations.”

Some of this is the natural economic return from the high point of the pandemic years, as we’ve seen with the recent Zoom layoffs. Some of it is related to forward-looking concerns about inflation and a potential recession. And some of it is investor caution as companies like FTX, WeWork, and Uber failed to turn into expected investor payoffs.

Know your financials – and how to present them

Just as with anything else, the best companies work with what they have instead of the resources they wish were available. Start-ups should build their case to investors around three traditional business metrics:

1. Financial forecasts with periodic metrics of success to prove forecasting legitimacy. This can often be achieved with a 24-month forecast broken up into four quarters for the first year and two six-month windows for the second year. This traditional approach to forecasting will give investors confidence that you take their money seriously and that they can hold you accountable.
2. Use top industry metrics to show the validity of the forecasts. For example, Deloitte’s 2023 tech outlook found opportunities in health care and climate-related tech in response to regulations. Showing a deep understanding of the wider industry you’re targeting will give you greater credibility than competitors who are reliant on generic claims like “technology is the future” or “the potential market size is X.”
3. Compare actual performance to past projections. Anyone can claim they are going to hit a targeted revenue threshold in 2023 or that milestones will be met. Investors want to know how your past performance compared to past projections, what technology improvement milestones were met, and if you were able to expand to new markets or expand your staff as promised. Being able to prove past promises against actual performance will increase your credibility and, therefore, your place in the marketplace for investors.

Wong said that “there’s no magic” to communicating financial information to investors. He looks for “cash and liquidity resources, burn rate, and gross margin,” and said start-ups “should produce monthly balance sheets and income statements” for both internal and external use.

Okay, so you have the financials – now what?

One of the things that hasn’t changed in the tech world is the need to get ahead of the competition any (ethical) way that you can. Once you have the fundamentals in place and your story ready, it’s time to accelerate your growth by telling everyone about it.

This is the one area FTX got right. The company’s fundamentals were lacking, which is why it failed. But along the way, it got some of the best media coverage the world has ever seen. And that coverage gave investors, regulators, celebrities, and other target audiences confidence that FTX was the real deal.

Your exposure and initial growth may not be as explosive as FTX, but nor will you likely implode. Instead, by using strong financials, you’ll create the narrative that you’re a game-changing company which:

• Attracts new investors because of your financial strength.
• Hits metrics that matter to investors and other stakeholders.
• Understands the competitive advantage your company has compared to the industry, as well as the risks and rewards investors can expect by trusting you with their money.
• Has competent, profit-oriented management and advisor teams which will lead the company to success and investors to greater returns.

Using webinars, white papers, social media, earned media, and the other tools of surround-sound marketing and branding, your disciplined approach to business growth will create a trusted path of success that will show investors today and tomorrow that you’re the company of their future.

This piece was originally published by Dustin Siggins and Cheryl Heusser, CPA, CFE at TabbFORUM.

The media hasn’t escaped scrutiny and criticism. The industry has been accused of failing to provide proper examination of FTX’s practices while giving both the company and SBF enviable coverage for years. Favorable stories ranging from SBF’s political views to his alleged business acumen and even his age – he’s just 30 years old – were all the rage.

But the media’s narrative-driving coverage doesn’t stand alone. SBF and FTX hired multiple public relations firms which undoubtedly drove significant coverage. And while PR firms can’t be expected to thoroughly audit every prospect, there are still lessons we can take from FTX’s collapse to act ethically, protect our reputations, and work with the best clients.

Always remember the clients’ end customer

FTX’s investors lost their shirts, as did the crypto industry generally. Somebody loses money every time a company, industry, or wider economy take a downturn. Those losses are often the known risks of investing…but not always, such as when average Americans lost money in the 2008 recession due to unethical corporate practices which were backed by bad government policy.

PR firms can provide a professional barrier between themselves and risky clients by always keeping the end consumer in mind. Does it seem like this product, service, or process will benefit the end consumer? A yellow flag should be raised if the answer seems like “no” or “this is too good to be true.”

Watch for competence and integrity

Business failure can happen for many reasons. Again, PR firms can’t audit everyone, and even major scams like Elizabeth Holmes’ often sneak through proper safeguards. But when a prospect can’t seem to get its act together, it raises the question of whether the prospect simply needs time and a little helping hand – or if the organization doesn’t care about best practices, integrity, and ethics.

Ethics aren’t always about the ever-changing personal values about which people often disagree. They are mostly related to universal values like paying staff well, admitting and correcting mistakes, and not shafting customers. Yellow flags in this area are not just good for avoiding bad publicity; they also help firms avoid getting shafted.

Does the prospect (or client) fail the firm’s ethics/beliefs test?

This is the side of ethics and morality that has driven the business world bonkers for a decade. What personal values are held by the company owner and/or company employees that would make a prospect untenable?

For example, a pro-life PR pro wouldn’t take on Planned Parenthood as a client. But is a client who supports legalized abortion when the mother is raped and when the mother’s life is at risk also unacceptable?

Similarly, a firm owner who supports Black Lives Matter isn’t likely to accept a conservative legal or gun group as a client. But what about someone like Senator Tim Scott (R-SC)? He says he’s been treated poorly by law enforcement because of his race. He also believes that America isn’t racist, and that police are valuable to society’s well-being.

Only the company can draw its own lines – which ones can’t be crossed, and which ones can be crossed for the right sum of money?

Look for flags early and often

The easiest way to avoid being attached to disastrous companies is to weed them out ahead of time. Unfortunately, there’s no rule book for that, so PR professionals need to:

• Remember the end consumer.
• Watch for competence and integrity (or lack thereof).
• Determine how the prospect aligns with the company’s basic beliefs/ethics.

A version of this piece was originally published by Dustin Siggins at PR News Online.

Just a few months later, however, Fyre Festival became known for something else: one of the greatest failures in show business history. Guests’ accommodations were poor, every performer pulled out of the event, and the location was a gravel beach across from a Bahamas resort.

Fyre Festival was a one-of-a-kind failure to deliver. But it’s just an extreme case of a common business problem: flashy and oversized campaign promises burning out because the campaign’s foundations are built on sand.

Weak foundations create poor publicity

The Fyre Festival was built on illegal foundations. What’s more common is when companies make big acquisition announcements, growth claims, and profit projections. They get tons of press…and then the acquisition falls through, growth is stagnant, and profits are way off.

This isn’t just a business problem. The Republican Party’s expected midterm election Red Wave turned into a Red Trickle. A party that was expected to take control of both chambers of Congress has only a modest edge in one of them.

The media and politicians will argue about where blame lies. For our purposes, it’s important to note that holding a chamber of Congress gives a party significant power and influence. However, Republicans fell flat compared to well-promoted expectations, and the resulting tsunami of bad press has damaged the party’s brand positioning heading into 2023.

All announcements and projections have risk. Companies can’t always anticipate governments blocking acquisitions, recessionary effects on growth, and inflationary costs reducing profit. But the best announcements are made with those risks in mind and come after a sturdy foundation is built on preparation, anticipation, and execution.

Fyre ignored warnings that their plans and timeline were wildly unrealistic. They burned through their investor money and had dubious schemes to repay expensive short-term loans. And lead organizer Billy McFarland already had a track record of questionable business dealings. The Fyre fiasco landed him in jail.

Fyre’s bubble of fame and failure is similar to that which we saw late last year with Sam Bankman-Fried’s FTX. Bankman-Fried was a multi-billionaire before the age of 30, barnstorming the cryptocurrency world and becoming the Democratic Party’s second-largest donor in 2020. He was going to change the world – until he burned through cash reserves, exposed a weak company infrastructure that may have included illegal activity, and was arrested.

From corruption to incompetence, many things ruin great publicity

 Trust doesn’t happen in a vacuum. The best social media promotion, influencer endorsements, and media coverage backfire when the underlying foundation isn’t build on competence and ethics. McFarland and his compatriots found this out this years ago; Sam Bankman-Fried discovered it more recently.

That’s because publicity doesn’t create good news. It simply capitalizes on what’s already going well.

McFarland was going to change the entertainment world, until the Fyre Festival collapsed. Bankman-Fried was the Democratic Party’s second-largest donor in 2020 and planned to lead politics and economics to new futures. Now, they’re both just examples of how marketing and branding can’t overcome shaky foundations.