By now, it’s clear that blockchain technology is here to stay, and it will have world-changing impacts across virtually every industry.
With such change comes opportunities to invest in what will be the next unicorns. Having been a journalist in this space for several years now, I’m going to share my thoughts on what I’ve learned from venture capitalists (VCs), startup founders, and thought leaders in the industry.
Every industry will be impacted—10% of global GDP could be on blockchain by 2027
Having watched various panels with some of the smartest VCs in the blockchain industry, I’ve noticed that they disagree on many things, but they all agree that no industry will escape the blockchain revolution.
Scalable utility blockchains will impact everything from banking and insurance to supply chains and logistics to gaming and entertainment. Some of these industries will be improved by it, while others will be totally transformed and disrupted on a fundamental level.
Investors who want to survive and thrive in the long run rather than make a quick buck should focus on companies aiming to provide utility in the biggest global industries. There are no shortcuts; companies that don’t deliver value won’t make it.
Having heard multiple experienced VCs talk about their investments in the blockchain space, I’ve learned that some have a narrow focus on one or two industries and only one blockchain, while others cast a wide net, investing in companies that utilize the right blockchain for the job at hand in any industry. There’s plenty of room for different strategies and opinions on how the future will look.
From the other side of the table, startups looking to raise capital should be strongly focused on communicating the value they intend to provide and how big the addressable market is. They should have at least a minimum viable product and some skin in the game.
There’s no limit to the industries blockchain technology can impact. Whatever you want to invest in or raise capital for, there’s a suitable match somewhere in the blockchain industry.
Entire new business models will be created, and existing ones will be improved
While blockchain technology can improve existing business models, e.g., by making them more efficient and transparent and creating greater accountability, it will also disrupt and challenge many existing business models.
Two examples come immediately to mind; subscriptions and the ad-based model of the revenue models that dominate the internet today. With micropayments, tying users into subscriptions for publications, games, and other digital products is already obsolete. Likewise, subjecting readers and viewers to annoying ads that create an inferior user experience is a dying model.
With micropayments at scale, the ‘how we’ve always done it’ models will face much-needed challenges. Many of these new models will restore the ‘user as the buyer’ way of doing things rather than the ‘user as the product’ model we’ve become used to in the last few decades with so-called free services.
At the Global Blockchain Convention in Dubai, experienced VCs said blockchain technology would impact ‘transactional industries’ the most, specifically payments, banking, gaming, and insurance. Investors should be thinking not only about investing in companies that face consumers but those that are building the infrastructure that will enable these new business models at scale.
Likewise, startups have many opportunities to build infrastructure and products that will manage data, automate payments and billing, handle disputes that may arise, and more. It’s a whole new world, and there’s endless opportunity for those who understand the big picture.
Experienced VCs look for specific things—team, product, and market
Switching gears for a moment and viewing things from the point of view of startup founders, many wonder what VCs in the industry look for. Again, we can look at the various public discussions and panels where experienced blockchain investors have told us directly what they look for before making a financial commitment.
Almost all of them mention the team. The more experienced, the better, and the more successful projects the team members have worked on, the more likely they’ll be viewed in a favorable light. Also, almost all of them said that skill gaps were a commitment killer. The team has to be right for the job at hand, and in such a competitive space, there’s no room for teams that don’t have the skills required to row the boat all the way home.
More and more experienced investors insist on a Minimum Viable Product (MVP) from those who pitch them. Dr. Kurt Overley said bluntly that he and his team “don’t invest in ideas.” They want to see a product prototype, some skin in the game from the team, and a solid business plan that shows the team knows what they’re getting into and what the potential is.
Every one of them also considers the addressable market and business use case. After all, a startup can have an all-star team and the best product in the world, but if the market isn’t big or is better served by an existing product, there’s a limited upside, and the probability of failure increases. Those pitching blockchain investors should show they have done market research, including the total addressable market, some basic financial projections, and why this startup is going to be among the 5% that make it.
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