The Early Stage of blockchain-based startups

By Ksenia Beloglazova on The Capital

Ksenia Beloglazova
Oct 22, 2019 · 3 min read

The early stage of blockchain-based startups differs significantly from the early stage in other industries.

And that’s why:

Usually you can write a prototype, run a test advertising campaign and see the reaction of potential customers to the product. It is inexpensive and can often be done quite quickly. Low costs allow such testing to be carried out repeatedly. Each time, we can incrementally adjust both the business model and the advertising campaign according to the results. This process most often does not require obtaining specialized licenses and permits.

For blockchain startups, the situation is quite different. Usually, as you enter the field of cryptocurrencies and tokens, you immediately have to deal with banking legislation, financial services legislation, and securities legislation. To comply with all of these requirements, the blockchain startup has to spend tens or even hundreds of thousands on the law firm services, on various kinds of licenses and certificates. Moreover, these funds have to be spent on the very early stage, such as limited functionality test mode launch.

All this makes the product design stage much more important. There are a lot of questions that require an extremely detailed study on the very early stage. For example these: Who will be your client? Why he is going to be your client? How much money your client is going to pay you?

The crucial points such as the target audience, promotion channels and bounty programs are described in detail and repeatedly checked on the basis of statistical information, in personal meetings, in focus groups. Subsequently, on the next stage the blockchain startup immediately starts spending a lot of money on lawyers and all sorts of licenses. All this happens even before the spending on marketing, before the first clients and the first sales.

The redeeming facet is that there is no need in the borrowed money for project development after that. Blockchain is a young and fast-growing industry. That is why, if you calculated everything correctly, the cash flow of blockchain companies is often more than enough for development. Where else are unicorns appearing so fast? I remind you that the Binance exchange appeared in 2017. Now is 2019. How many billions of dollars is Binance worth today? Have you missed the early stage of a promising blockchain startup and decided to wait until it has its first customers? You can relax — this future unicorn is no longer for you. Today is a unique time for the blockchain. Indeed, you can build a company worth one billion euros in just a couple of years. But the investors have to make a choice at the Early stage, which turns out to be not Early at all for blockchain startups. Afterward, it will be too late since the successful blockchain startup often does not needed investments anymore.

The Capital

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