How to describe your blockchain startup

blockchain-startup

Two years ago, simply dropping the world blockchain in your pitch would have sent investors scrambling to invest in your startup.  But things have changed in 2019.

The rise of initial coin offering (ICO) in 2017 opened possibilities for any blockchain startup to solicit investments by circumventing the hugely regulated and bureaucratized financial markets. However, the infiltration of the ICO marketplace by scammers has scared investors away and blockchain companies are struggling to secure funding.

There’s a big difference between a typical blockchain startup today and the one established during the ICO boom of 2017. Most of the blockchain projects these days are focusing on explaining the advantages of their technology, instead of the fancy words about decentralization or enabling a trustless ecosystem. Why? Investors are becoming smarter—they have learned from their mistakes and have improved their methodologies for analyzing blockchain startups.

So how should the best entrepreneurs communicate their ideas about blockchain technology to investors and attract the funding they need?  Here are some of the amazing tips to effectively explain your blockchain startup.

1. Keep your pitch simple

The best presentation is one that is simple to understand. Contrary to popular belief, investors are not as concerned with the underlying technology of your product. All they care about are three benefits—convenience, cost reduction, and safety. If your product address these pain points effectively then it is a better technology. So you might as well not mention the word “blockchain” unless it is absolutely necessary.

The best blockchain startups that work on convincing investors that the technology they are pushing is much better than what exists in the market attract investors and are able to secure funding.

2. Show your product

Now, there are some investors who you won’t be able to reel in unless you show them how your product work—from a technical perspective. Where do you start?

To demonstrate the potential of your blockchain project, start with the basics. Explain what a ledger is—whether it’s a database of supply chain transactions, storage of digital identities or even interactions between farmers and customers. Once investors understand that, it then becomes easier for them to see how blockchain is applicable in many different areas.

With regards to decentralization, you need to explain how governance using a distributed network benefits your customers. For example, decentralization in the travel industry eliminates middlemen which in turn cut costs for air travelers and increase profits for airlines and service providers.

3. Describe the economic value

One thing about blockchain is that it holds the potential to transform our world into a more decentralized, trustless society. But to investors those buzzwords mean nothing.  Avoid using jargon and tech-speak when pitching to investors. Instead, focus on the economic value your blockchain-based product brings in the marketplace. Communicate your business model so that investors can understand how your idea will convert into being economically viable.

And the best way to get that message across is to answer questions such as: What does your blockchain startup sell? Who do you sell to? How much do they pay? And how do they pay?

4.Get into the numbers

Don’t say you’re going to build the fastest blockchain protocol in the world, because most of the investors won’t even believe it.  What’s more compelling than big talk is to show exactly how you will achieve that goal—what data do you have to support your claim?

If your blockchain product can increase clients’ costs by, say, 20 percent—or increase their business efficiency in some measurable way, share that information.

Trying to sell “the next generation” of a blockchain doesn’t really work. If you’re trying to convince investors that tracking food items using blockchain is safer than using a simple database, then you should be prepared to demonstrate that in a quantitative way.

5. Forget ICO

Given the sketchy reputation of initial coin offerings and the fact that ICOs are in the spotlight of financial regulators all over the world, it’s best to avoid it.  As long as you have quality technology and your industry is favorable, that alone is enough to elevate your pitch.

To succeed in the burgeoning blockchain space, you must focus on building great products that customers will love and appreciate. Always remember that investors are not stupid—they have a way to sift out the good ideas from the bad—and only an ingenious blockchain solution will help you stand out.

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About the author

Vincent Olago

Vincent Olago

Vincent Olago is the Managing Editor of Ledger Africa and has been active in the blockchain space for three years now. He's passionate about entrepreneurship and the potential of disruptive blockchain technologies to reshape our world. He supports startups to tackle blockchain challenges, address strategic problems and optimize growth.

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