Launching and growing a blockchain startup is like a race; not everyone wins. According to research done by Deloitte in 2017, blockchain projects have an average lifespan of 1.22 years, and only 8% of those on Github are actively maintained. That means a majority of blockchain projects don’t survive past a year. Not much has changed since then.
There are a few main reasons why blockchain startups fail. As an entrepreneur, business owner, or prospective founder in the blockchain space, you need to know what those reasons are and how to avoid them so that your project is more likely to be successful. This article details the top 6 reasons why blockchain startups fail and how you can avoid them.
1. Lack of a Concrete Vision for Their Product
The blockchain and cryptocurrency space is profitable to the average eye. It’s a no-brainer that many people will want to cash in with a product. However, when there is a lack of a real vision and a concrete idea of what the product should look like and what features it should have, everyone involved will waste their time.
You can’t wake up one day and just decide to build something for blockchain. When founders do not know what they want to build, they will waste effort with constant scope changes, and their project development will drag out way longer than it should. Knowing what you want in a minimum viable product (MVP) is the foundation of a successful outcome.
You need to ask yourself these questions:
- What do I want to achieve with this project?
- What should users be able to do in the app?
- What problem should the app solve?
- What are some of the main screens that users should see when they use the app?
- Are solutions already available? In what areas are these solutions lacking?
- What is the approximate size of the market?
If you don’t have concrete answers to these fundamental questions, wait until you do, or at least work with someone who can help.
2. Building a Solution to an Unknown Problem
The blockchain and crypto hype has created a hoard of people crippled with the fear of missing out, which has caused many to create businesses focused on the glory rather than building products and services people actually want.
Many entrepreneurs dive first into creating a blockchain-based solution without knowing if it solves a specific problem. If your solution doesn’t solve a problem, it lacks commercial viability. In that case, no matter how nice the user interface is, it will likely collapse within the first year due to a lack of market adoption.
Many founders come up with an idea that they believe is revolutionary and can change the world. Still, unless it’s solving a problem that people have and gets validated in the market by real customers, it won’t be successful.
You shouldn’t build a solution searching for a problem; your product should solve a specific problem from the beginning.
Knowing the problem you’re looking to solve also helps you communicate better with a blockchain app development company to get your MVP to market sooner.
3. Placing More Focus on Making Money Rather Than Solving a Problem
Many blockchain startups fail because they focus more on the money than the customer. We get it; businesses have one overarching goal: to make as much money as possible from their products and services. However, that is only possible when they provide solutions to a real problem. If a customer-centric attitude is completely off the table, there is a big issue.
Also, in some cases, founders come into the market with great ideas to solve a problem but forget that along the way.
That, to some extent, can be attributed to investors who are throwing record amounts of funding at new projects that have little more to show than a lite paper and a basic landing page. Venture capital funding in the first quarter of 2021 has exceeded the entire amount invested in the whole of 2020, according to Statista.
As a result, some founders might become more motivated to focus on the money and the next stage of funding than the customers, forgetting that they can only make a profit when their target market loves their product.
You can have your sights on money but put more effort into solving customers’ problems and providing the best solution in the market.
4. Lack of Team Structure and Defined Roles
When a team lacks strong leadership, the mission-critical decisions that need decisive and direct answers will drag out and delay a project. Also, if the roles are not defined and clear lines are not drawn with regard to responsibilities (i.e. who has the final say with the token economics, who has the final say with the UI/UX, etc.), the development cycles will never gain traction.
When it comes to expertise, your development team must have the right technical expertise. There are millions of software developers, but only a tiny fraction understand developing for the blockchain.
If you make the wrong decision with your app development team, your blockchain startup is doomed. That lack of expertise will likely lead to insecurity in your app, a lack of core functionalities, and a waste of money. To avoid this, properly vet your blockchain app development company; read this article to learn how to hire blockchain developers.
5. Early Fundraising Success That Leads to Greed or Sloth
Countless times, success has been the downfall of a successful product launch. If the team does not have strong leadership and a clear vision for what a future looks like after raising the money, there is often infighting, greed, and laziness. I have seen how that destroys a company from the top down.
There are situations where new blockchain entrepreneurs lazy away, thinking that if they had more money, they could develop this or that feature or achieve this much profitability. While that can be true, it isn’t always. You should be actively thinking about or growing your business at all times.
When you leave selling your product for too long to focus on raising more and more funding, the absence of profitability will eventually catch up with you.
Raising money is a means, not an end. If you are fortunate to get early fundraising success, use that as a motivation to work harder, grow faster, and create more value.
6. Lack of Speed
Many blockchain startups fail because they choose the wrong development company causing their app to take too long to build and lose momentum. Entrepreneurs need to get better at vetting their teams, so they are on the right track to success as quickly as quality allows.
Keep in mind that blockchain is evolving fast; if your startup isn’t building the product fast or getting to the market as quickly as possible, you might fail to keep up.
Also, some founders want to produce all the features before they launch. No app is ever complete. That’s why you have the MVP. Focus on the MVP and launch with that. With time, you can add more features based on the market demand.
If blockchain projects have the right technical expertise and founders the right mindset, you will save time and funds.