Let me ask you a question. Is the start-up founder in the following discussion convincing?
Investor: What are you up to?
Founder: We are an internet start-up
Investor: More precisely?
Founder: We are launching a furniture business
Investor: What is your edge?
Founder: We will be online! We will have instant access to the global market with very low setup costs. Our clients will be able to order from their couch!
Answer: No! Not only because if clients are buying furniture they may not have a couch, but because being on the internet does not lead to instant success. The internet is simply a protocol which is defined as a set of rules and guidelines for communicating data. A protocol cannot be a differentiator, it is an enabler.
Obvious right?
Not really. As a VC fund focusing on solutions which use blockchain protocols we sometimes have similar discussions with founders. It usually goes like this:
Investor: What are you up to?
Founder: We are a blockchain start-up
Investor: More precisely?
Founder: We are launching a traceability solution for supply chains
Investor: What is your edge?
Founder: We will use blockchain tech! It has many advantages including immutability, decentralisation, auditability and automation
An e-commerce website is not successful because it is online the same way a blockchain start-up is not successful because it uses the blockchain.
Our advice for founders
The unique selling point or secret sauce cannot come from the benefits of a protocol. For investors it is not differentiated and implies low barriers to entry. And clients, well, they don’t care about how tech works, they care about what it does for them. They don’t need blockchain, they need solutions and are tech agnostic.
Tell us about why your clients need your product. Founders should be able to pitch their start-up to investors and product to clients without using the word blockchain. It is only later that the technology underpinning the product comes into play.
On the bright side
We have met with many talented founders with decades of experience in their respective industries. We would say that 95% of our discussions with them were not about blockchain. The focus, as you would expect, was on the team, the product market fit, business model, go to market strategy etc.
As the hype around blockchain has died down we are seeing a lot less “blockchain start-ups” and a growing number of experienced founders with a clear product and business model. Let’s get thought through blockchain applications off the ground!
About LeadBlock Partners
LeadBlock Partners is a venture capital fund based in London investing in early stage enterprise blockchain & DLT start-ups. We believe blockchain technology is becoming a key building block of the digital economy. We provide financial and strategic support to start-ups in our investment portfolio by leveraging our network. We are currently actively seeking startups as well as fundraising so reach out!
