The good & the bad about blockchain business pitches - where are we going?

Exploring how poor startup pitches and practices bring us closer to the next major blockchain bubble.

Zoup2018-11-24
Updated image to be a bit more optimistic, thank you Lydia!

A few important remarks to begin with

Over the last few months, I had the opportunity to attend a large number of MeetUps, blockchain events, conferences, and have been confronted with many ICO and blockchain startup pitches.

I have observed several very interesting things:

  • The difference between a good and bad blockchain startup pitch.
  • The four strongest values of the blockchain.
  • That the entire blockchain startup ecosystem is about to see a massive purge as more and more projects fail to deliver a product that capture users — bringing down with it the dream of “doing everything on the blockchain”.

What does a good blockchain startup pitch look like?

For me, what defines the quality of a startup pitch, lies in the promise of value. In most cases, a technological choice is not, in itself, a promise of value. A little reminder to arrive at this conclusion: taking an existing service, extremely profitable and solving a concrete problem, then simply putting it on a blockchain is NOT a promise of value.

Adding the terms “decentralized” or “transparency” to Uber is unfortunately, not enough of an incentive to disrupt the transportation industry. Similarly, building “AirBNB on the blockchain”, “Block-Facebook”, or any GAFA on the blockchain is not a project — it is a copycat with a buzz-word. These projects may provide real value but their target market is incredibly niche.

This startup pitch method is based on a recurring business model: Re-create a concept that weighs billions, add the blockchain keyword, and hope that at least a few crumbs will fall from this unnatural union.

Matt Lockyer sums up the current token ecosystem well in his article “Money for nothing and tokens for free” — https://hackernoon.com/money-for-nothing-and-tokens-for-free-1a280159e138

Thus, a “good” blockchain startup pitch does not rely on the fact that the project is based on blockchain technology, but on the value that the project provides itself.

You do not promote a best-seller by boasting about the quality of the paper it is printed on.

Blockchain is a medium. Users don’t care about the medium — they care about utility and experience.

Users care about the value of the service, not whether it has potential to be disruptive or not.

The values of blockchain

If we had to summarize the blockchain in a few words, I think we would use the following terms:

  • Unforgeable
  • Transparency
  • Decentralized
  • Traceability

These 4 ingredients are real technological and functional opportunities with the potential to deeply change the face of many sectors including finance, information, gaming, etc… However, for blockchain’s benefit, it is important to keep in mind that “blockchain” is not the answer to every question, and it is not going to “ disrupt ” every business model. Too many projects are still trying to simply stick some of those 4 values to any industry in order to disrupt it — it is not enough.

Bringing better traceability to Uber, more transparency to AirBnB, or decentralizing Amazon, does not provide enough value to users relative to the amount of additional complexities it introduces. These blockchain features alone are not solving existing problems or, providing enough value for users to actually use them over existing solutions.

And above all, let’s not forget that we are talking about companies that generate billions of revenue dollars in the year. I am extremely skeptical that these companies could be overthrown or disrupted by a third party player who is rebuilding their same model “on-chain” .

Where will the next Blockchain bubble come from?

The speculative bubble observed in December 2017 / January 2018 was a small bubble based only on financial speculation. It has undeniably hurt the crypto-financial markets, but at the same time has given tremendous visibility to the technology and the entire ecosystem.

The next bubble to come will not only be financial, it will be a deeper bubble — the blockchain-“ disruption ” bubble. That day, is when the entire ecosystem (entrepreneurs, investors, individuals, mainstream, …) will realize that YES , the blockchain has a huge potential, but NO , the blockchain is not the solution to every problem.

In the worst-case scenario

99% of blockchain startups will face their own limits and lack-of-value, and will eventually collapse. Let’s keep in mind that outside of blockchain, almost 90% of startups failed.

Source: https://www.failory.com/blog/startup-failure-rate

Investors (Business Angels, Venture Companies, ICO participants, …) will assume significant financial losses, whose impact could be felt more widely on the economy. In any case, this collapse and awareness may throw doubt on the potential of the technology, and blockchain will once again be considered “dead” before returning from the ashes.

I believe blockchain will follow the adoption curve described by Gartner, and that we are fast approaching the “Peak of inflated expectations”, which will take us directly to the “Trough of disillusionment”.

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Source: https://www.gartner.com/en/research/methodologies/gartner-hype-cycle

In the best-case scenario

Most of these blockchain startups are bought by others, and this phase of all-out entrepreneurship will have trained the population to these new technologies. A generation of entrepreneurs will have been sensitized to blockchain and it is a safe bet that this will boost the whole ecosystem.

With the solutions to fabricated problems removed, workforce trained, and the genuine entrepreneurs thriving, the ecosystem will benefit from healthy but exceptional growth as we observed in the years leading up to the tech bubble.

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Source: https://en.wikipedia.org/wiki/Dot-combubble#/media/File:USVC_funding.png

Some positive thoughts to conclude

Of course, this is only one future perspective for blockchain. With this evaluation we want to refocus the debate on how to create true utility and value using blockchain instead of hype and wishful thinking. We would like any new blockchain project to answer those two simple questions before launching:

What value will my product bring to my users?

How will blockchain help my project technologically, more than any other technology?

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