How NFTs are Disrupting the Startup Landscape
Those that have been hiding under an EtherRock might be asking “What’s an NFT?!?”
NFT (or Non-Fungible Token) are one-of-a-kind digital assets that provide certification of ownership of the asset a user is buying. Most NFTs live on the Ethereum blockchain network and are bought and sold online where all transaction details are secured. NFTs are all unique, meaning you can’t just exchange one for another (like a US Dollar or Bitcoin).
And whether you’re a startup entrepreneur in an industry where an NFT use case hasn’t been established (yet) or someone that is thinking about starting a business, it’s important to have an understanding of NFT technology and its potential in various industries.
Just do a quick search for “NFT use cases”, and you’ll see the possibilities are endless. Industries like Gaming and Digital Art have been the early movers in the space. Use cases for Music, Real Estate, Ticketing are now real, and it isn’t a stretch to imagine downstream potential use cases for Advertising, Retail (Nike NFTs anyone?), and even Healthcare.
But IMO: the most disruptive aspect of NFTs right now is the incredible transparency it brings to the startup process for NFT entrepreneurs, their audience/customers, and potential investors.
- Traditional web startups typically require customer surveys or another form of data collection to gather feedback. Customer engagement & feedback is woven into the culture of NFT communities. Customers in strong NFT communities actively work together through platforms like Discord and Twitter to discuss product ideas and help shape the future plans for their projects. The first version of the internet helped promote common interests with webpages, Web 2.0 promoted communication around these interests. Web 3, led by NFTs, takes things a step further and promotes shared incentives around common interests.
- To raise money startups typically need to build a Product, have Sales, be in a Growing Market, etc. With an NFT launch as an MVP, entrepreneurs can initially focus on building community around a shared vision between a company and its customers. Companies can Mint and then sell a limited number of NFTs to early customers. Each NFT sale = early proof + startup capital to the Founders.
- Potential investors can see indicators of Product / Market Fit with NFTs with full transparency. Investors can buy an NFT and/or engage with an NFT business’s customers and culture. Before NFTs, investors could look for customer validation on crowdfunding platforms like Kickstarter. Kickstarter campaigns typically just collect pre-orders and serve as early validation of market demand for investors. But these early customers don’t really have a say in what goes into the product they are buying. With NFT’s, each community has the chance to shape the company’s product and roadmap. Feedback loops are constant. Also, NFT sales on the public blockchain are accessible by anyone. Cryptoslam, an NFT industry aggregator, shows ~$5 billion in NFT sales in the last 30 days, so definitely more than niche at this point.
And while NFTs can streamline a startup’s ability to gain customer feedback and produce early capital, that doesn’t mean NFT first movers can skip over the other parts of building a startup. Companies still need to focus on a big problem, have a unique approach to solving it with a team that is ready to execute. NFT’s create a new opportunity for these companies to get started.
About the Author: Aaron Tainter is the Senior Program Manager of Innovation Works’ AlphaLab accelerator programs that provides investment, mentorship, education and network-building for technology startups to help companies rapidly iterate through early stages of product and customer development. In this role Aaron oversees the day-to-day operations of the AlphaLab accelerator program and works closely with AlphaLab companies to help guide the companies through their initial stages of development.
Want to learn more? Follow Aaron on Twitter @atainter for more NFT insights.