Chances are good that in the last 12 months you’ve met a number of people at parties or networking events that were working for a crypto startup… Now, a year later, how many of them are still there?
Data tells us that something like 92% of blockchain projects/startups fail, and their average lifespan is 1.22 years.
Just to give that some context:
- 17% of restaurants close in the first year (nowhere near the 90% myth)
- 21% of real estate agents and brokers fail in the first year
- 19% landscapers and automotive repair shops fail in the first year
So why are so many of these blockchain companies failing?
Everyone Wants to Be First, Nobody Knows How to be Best
Both the velocity and volatility of this marketplace are insane and not for the weak.
The focus is often getting the tool or platform up and running as quickly as possible, while making it as good as you can in that time window.
With so many companies jockeying for position in a saturated marketplace, it can be impossible to define a true value proposition or competitive advantage. Let’s say you go into the experience seeking to create the product with the simplest user experience. That’s great, until someone arrives slightly sooner on the market with a slightly more user-friendly product.
Now, you’re “just another” blockchain start-up.
The Business is Just a “Side Hustle”
Very few of these startups actually have a physical office space or full-time staff. Most of them are backed by one or two financiers, and a whole lot of people working remotely and pounding away on their laptops on evenings and weekends.
These workers may be offered enough money to quit their day jobs, “Once things gain momentum.” But that promise is the new “The check is in the mail” and rarely comes to fruition.
The Business Has No Plan
When time is of the essence, there is rarely an opportunity to take a few weeks to do some market research and create a thorough business plan. This means most of these businesses are being launched with the same fundamental flaws:
- No plan on how they will grow or scale
- No clearly defined value prop
- No clear marketing plan
Like many businesses, people will go off to work for themselves because they’re experts in (and are passionate about) their given space. A chef will open their own restaurant, a lawyer will open their own practice, and a graphic artist will open their own studio.
However, in the examples above, the entrepreneur will have spent years as an employee in that space, learning and observing what works and what does not.
Fintech is such a young market that this isn’t really possible. “Tech guys” will start their tech business with a focus on the tech, but no business acumen. And this leads to trouble down the line.
As more companies rise to the top of the crypto and blockchain world, we will start to identify what they all had in common. In the meantime, we can only sit back and identify why the failures fall short.