The deadliest sin for startups is arrogance.
Founders often approach us convinced that they have product market fit, sales forecasts for millions in revenue, “hack proof” systems, and simple plans for hiring hundreds of “top 1%” employees, sometimes without any evidence to back it up.
A startup’s survival depends on a founder’s ability to stay humble. That means keeping an open mind, asking the right questions, and verifying the answers until the data — not just blind faith — proves out your hypothesis. Don’t be afraid to seek out help, and even to use creative methods to get what you need. Everyone needs help (including us), and the winners in this game have the courage to ask.
Over the last seven years, we’ve funded over 2,000 companies and dozens of blockchain and crypto startups. We’ve seen plenty of mistakes, and have made our fair share too. I thought I’d share some of the bigger ones here, especially because more and more blockchain companies are repeating and even magnifying them.
1) A great product will market itself
“If we build something amazing, everyone will use it.”
This is a common misconception.
Yes, you need a great product to succeed, but if people haven’t heard of it or if they don’t understand why it’s better, it will still fail. You need marketing to raise awareness. Consider Apple vs. Samsung in the smartphone market. Apple wins with good product and great marketing. From networking protocols to databases, the best product does not always win. Instead the customer buys what they know, or they buy what they think is better because of good sales and marketing.
All of us have read a great whitepaper that’s full of good solutions to big problems, but after seeing a dead community and zero support, we quickly move on to another project.
Your marketing team will have a multiplicative effect on your product’s success. Invest in good marketing just as you would prioritize good engineering.
Need help here? Find an experienced marketing person on AngelList or through your network and bring them on as an advisor, or join one of the new blockchain accelerators.
2) Assuming traction is a given
“Everyone will trade the coin and its value will increase 100X. It‘ll be easy to build our community, attract employees, get developers, sign partners, and our ICO will last us years of funding.”
We hear this kind of wishful thinking a lot. There are thousands of coins out there. How will anyone notice yours? What data do you have to support this?
Perception is king at an early stage. You need to manage the value to attract developers, partners, and employees before the product is fully live and the coin has its utility value.
Community support and fit are vital to drive early evangelists. You’ll need developers to build DApps, partners to complete the user value, and much more. It’s even harder if you don’t keep that momentum moving. Blockchain projects require a lot of effort to keep all the groups moving forward and engaged.
If any of these things are outside your area of expertise, just ask for help.
3) Forecasting mainnet date with little engineering to back it
Nearly every startup we talk to forecasts a feature set, quality level, and mainnet date. Usually none of those forecasts end up being right. Correctly projecting two is feasible, but it takes real skill to hit all three at once.
Engineering discipline is crucial.
We’ve worked with a lot of companies on building up the engineering methods to support reasonable forecasting, including agile methods with production releases every two weeks and data collection to enable future forecasting.
Your community will quickly grow frustrated if you keep getting hacked, if there are long delays in features, or if features are constantly dropped.
There are a lot of competitive blockchain projects out there. You need to stay disciplined to win this game.
4) Ignoring questions around the liquidity and circulation of tokens
While crypto founders like to tout fancy token economics, it’s all too common for them to ignore what comes down the road.
Have you asked the right questions about your legal framework?
Your ability to get listed on exchanges?
Your ability to maintain liquidity and market making relationships?
Your answers could very prove the difference between a success and a failure.
5) Dismissing the fundamental dilemmas that startups face
For seven years, we’ve been asking startups hard questions around their product, audience, problems, distribution, and business model.
We see every startup as a bundle of risks. The most important work for founders is systematically de-risking (or pivoting) their companies.
Are you confronting the hard questions like startup founders should?
Blockchain startups aren’t solely about the technology, and founders in this space aren’t immune to the questions that any other startup business would face.
Hire the right people, not just engineers. Your blockchain company will need skills across a range of areas, from marketing to finance. Use data for decisions, not opinions. Stay humble and you might find some great solutions present themselves.
If you’re interested in joining 500 Startups’ summer program in blockchain and working with our team to help market your product, build traction, understand token economics, and build company structure and culture that will last, our program starts July 1st in San Francisco. Just email me at rob@500.co to get more info before June 22nd.
