Declining cryptocurrency valuations will drive more blockchain startups to failure unless these companies restart their startups.
As of November 28, 2018 and according to CoinMarketCap, there were 2074 cryptocurrencies and behind each crypto coin is a blockchain startup company. This number isn’t growing as fast as it did in first half of 2018 and there are good reasons for this.
Based on our earlier analysis of nearly 2000 blockchain startups, we found that nearly all startups focused on pure technology solution. They are building a piece of blockchain technology with no clear business focus.
As we shared in our earlier article in Irish Tech News, in our analysis we found that less than 25% of blockchain startups were developing some type of application that could potentially have a market fit if it was properly focused and executed. The balance of startups, see chart below, were developing new blockchain platforms and new type of coins that are usable only with their blockchain solutions.
These companies raised significant capital through their ICO process. They were well funded at least when the cryptocurrency valuations were high in the first half of 2018 and had the potential to develop practical blockchain based solutions for the market.
This situation significantly changed in the second part of 2018. Cryptocurrency valuations declined to all time lows and now over 900 blockchain startups coins are now worth zero. Many more startups will join this list if they continue on their present path.
Learning from successes – There is still time to make a difference. No one said that introducing a major change is easy. When Steve Jobs former CEO of Apple responded to a interview question 20 years ago about challenges in introducing technology change, he stated, “I am sure that you can make some demos, maybe a small commercial app that demonstrates those things, the hardest thing is, how does this fit into a larger cohesive vision that’s going to allow you to sell $ 8 billion, $ 10 billion dollars of product a year”. He also said that “one of the things I always found is that you’ve got start with the customer experience and work backwards to the technology. You can’t start with a technology and try to figure out where you’re going to try to sell it”. History proves that this strategy worked well for Apple and it does work well today in every successful business.
Start with customer experience – Blockchain startups can still turn their declining efforts into success. Start with your target customer experience and work backwards to your blockchain solution. Think about what your solution needs to do to deliver the experience you want them to have.
We have analyzed whitepapers which described unique solutions that promised to enable consumers and businesses to conduct business in a way that has never been done before. Eliminating the middlemen, and creating Peer-to-Peer transactions that enable consumers and businesses to transfer funds in near-real time and anywhere in the world are just few examples of promises made. It would be disappointing if these innovative ideas didn’t reach their fruition stage.
There are many examples of why startups fail and history proves that 9 out of 10 startups actually do fail. In the chart below, CB Insights illustrates the top 20 reasons why startups fail. This report which examined 101 failed startup postmortems shows that the two top reasons are “NO MARKET NEED” and “RAN OUT OF CASH”. The same reasons are present today in majority of the blockchain startups that we analyzed. Clear customer focus is missing and the rapidly declining cryptocurrency prices are also rapidly eroding the company’s capital budgets. If allowed to continue, both of these same reasons will eventually drive more blockchain startups to fail.
Startup companies that are still passionate about their solution should not give up. There is still time. Revisit your solution vision. Decide what type of experience your company wants to deliver to your customers and work backwards to determine if the technology you are working on will achieve your vision. You may need to alter your technology development but this is necessary.
Here are few tips on how to start with customer experience first:
Understand your customer
- Get out of the lab!
- Don’t outsource … do it yourself
- Talk to at least 50 people to gain insight into customer needs and if your solution meets their needs
- Talk to people you don’t know
- Don’t sell your idea, seek to understand their problem(s)
- Ask why … a lot
Create Minimum Viable Product (MVP)
- Create the smallest feature set that enables you
- To learn and receive feedback
- Follow incremental and iterative interactions with your target customers and not with a final product version
- Don’t build a prototype
- This is not a deployable version with the fewest features
- It should enable testing a hypothesis
- This may be a drawing, a slide, a wireframe, clickable workflow, etc.
Gather direct market knowledge
To create business success, knowledge is everything. Here are some proven guidelines from successful companies on how to gather knowledge.
- You must know more than others know
- Knowledge about customer needs will be your competitive advantage
- If everyone already has this knowledge, than it’s likely too late because someone has already solved the problem you are solving or they will solve it soon
- Knowledge must be firsthand knowledge and direct from target customers. There is no better substitute
- Reading the internet should only influence your direction and it should not be the base for your decision
Don’t wait until it’s too late. Act now and restart your startup with clear vision of your target customer experience. When you do this, your business will have a clear purpose and you will be part of the revolution that blockchain technology promises.