Blockchain (or distributed ledger technology) products are being developed right now by smart tech teams, entrepreneurs, startups, and enterprises all over the world.
The current ICO hype mostly fuels the trend. The whole token crowd-sale process (a more appropriate name than an ICO) is becoming more and more defined and even regulated to some extent. The era of pump&dump crypto “investors” is coming to an end.
The remaining crypto investors are starting to act a lot more carefully and with the help of VC backed “crypto” investment funds a proper process is starting to form. This change in behavior is good, but it does require more effort & knowledge on the entrepreneur’s or startup’s side to understand & execute on the “old school” MVP (minimum viable product) & MVS (minimum viable segment).
Although there are a few differences between the on and off chain product development process most steps are the same and some (e.g., community building = customer validation + fundraising), just have different names and grouping for the same thing.
D.Labs does not focus on nor provide crowd-sale setup services, but we do have an established blockchain product development practice (Ethereum based). In the last 4-5 months, we have been noticing a number of common mistakes that can have a significant impact on an ICO funded project’s ability to reach success.
1. The founders fell in love with the solution, not the problem
Blockchain by itself is a big positive step forward regarding what computers can do for us and even though networks like Ethereum enable a lot of things, not all problems are suitable to be solved using blockchain.
Often the realization of the entrepreneur or startup that their problem can technically be solved on-chain is enough for them to blindly fall into the ICO preparation process only encounter difficult questions and problems down the road.
Some ideas glorify their often cumbersome or even impractical solution just because it does somehow use their token. Also not a good practice.
Tip: make sure you truly understand the problem you are solving and ask yourself if this needs to be resolved using blockchain, tokens or even another product. The above point brings me to mistake #2.
2. You failed to identify on chain and off chain competitors that might be ahead of you
To be fair, most projects are aware of some their competition. Usually the on-chain ones. You must consider the old-fashioned off-chain competitors too. They might be solving the problem you are planning to address with blockchain differently or not at all – meaning it’s perhaps not that big of a problem or it could well be that they are just late to the party. But you must discover what you need to know who they are and what they are doing. It is also important to remember that your product should also appeal to non-blockchain enthusiasts in order to reach a larger audience.
Tip #1: Competition research also teaches you how these other companies are calling their service and customers and you could start using similar vocabulary to make your idea seem more familiar to users.
Tip #2: Call your competitor support, join their Slack, Telegram or Discord and ask questions about how they do things and what their plans are. You will be surprised at how much they tell.
3. There was no validation of the problem-solution fit with actual users
ICO teams are usually super proud of their whitepapers, token models and business cases. But it is rare to see a group that has validated their problem-solution fit with actual human beings in some way. This validation is critical since only direct user feedback can provide adequate evidence that at least someone outside your geeky friend circle finds the solution useful & maybe even valuable. Lean statup thinking starts with an assumption that intial hypothesis are flawed and focus on fixing them to create scalable business. Blockchain does not change this fundamental fact that rarely is an initial business hypothesis flawless.
There is more than one way to make iterations with blockchain products. It can be done withtesting in person or via a call, with a paper prototype or actual working product. The quality of the feedback is less important than real conversations with users are at this stage.
Tip: try selling your solution super early. An example would be to get a customer to play around your clickable prototype in Invision and then ask them to wire you some fraction of an ETH in exchange for your promise to invite them to a super early pre-sale event with a considerable discount.
4. Users and investors are two different groups of people, and you are not sure what to do about that
Our friends at Cofound.it say that for a successful crowd-sale the group of investors and product users should overlap as much as possible. A significant overlap is probably good advice to get funding, but after the initial launch, your product will have to attract & convince users outside your investor’s group (keep in mind – some are there just to flip your tokens anyway). These new and unbiased users will almost certainly think about your product differently. You have to be prepared for that and be able to identify the differences.
5. There is no (or not enough) token utility value
Tokens and their use in the product are probably the most blockchain specific item on this list. For the sake of simplicity, I’ll focus on just two of the currently most common token models.
Access model requires users of the platform to be the holders of an amount of tokens to be able to access the platform. For marketplaces, this can be applied only to one type of users and if used as a “deposit” can help improve the service. However once the product is live and has to attract new – non-investor – users this fact can severely hinder user adoption as obtaining the token might be a hurdle.
The token for service payment model is (despite being the first and most natural application) being used less in recent times for fear that it may be considered a security by some regulators.
The solutions ICO startups propose are often vague or too focused on the value appreciation mechanisms to make investors confident. Remember, the right investor would rather see how this token is going to attract more users than just increase in value due to artificial scarcity created by some buyback scheme.
Tip: Validate token utility with actual users on the platform and also with users of existing competitive or similar products. If they see the point of having the token in the system you are probably safe.
6. There is no need for your app to be a distributed one. Trust is maybe not a big issue.
Distributed means safe, secure, immutable, etc. but it also means very inefficient and costly. Make sure that users perceive trust in the non-distributed system as one of the problems. It the user does not see or understand the need it’s probably best to do at least the MVP in a classic way.
On a related note, a truly distributed platform will never be yours like a regular product would. If you have a hard time thinking about your product turning out like Wikipedia or an opensource project, then you should reconsider your strategy.
Tip: study how some of the similar distributed, open source or community-based platforms make money. Also see how and when they can exert influence.
7. Your customers do not know or want to pay in cryptocurrencies.
Looking back to mistake #5 a bit. While it is true that eventually even businesses and conservative internet users will be fully literate in crypto, we are not there yet (but could be in a few years).
Tip: if your platform has to deal with B2B customers, make sure you either have payment alternatives ready or that your B2B customers can legally access token markets form the country of their choice.
8. You do not have a multidisciplinary product team to drive product development.
In the classic startup world, the user today expects a great experience even form a new product. This includes an intuitive interface, fast operation, great support, reliability etc.
ICO teams often have the core tech and business competence but often lack UX UI, infrastructure, data and other experts. Once you are well funded, you can hire those on the market, but getting all these new hires aligned behind your grand vision while your company is growing like crazy might be challenging. Keep in mind that an MVP should only apply to functionality, not the experience.
At D.Labs we notice this problem a lot even with traditionally funded businesses. Once money hits their bank account, the founders often fail to shift into higher gear quickly enough to meet investor and user expectations. With ICO startups this is even worse since ICO investors often lack the investment experience and patience.
Tip & a shameless plug: look at full-stack product development companies like D.Labs. This kind of businesses can help you fill the gaps in your team structure and make sure your MVP meets your user’s expectations regarding performance and UX.
9. You do not have a build – measure – learn loop established.
Even if you managed to raise several million in your ICO and your whitepaper was peer-reviewed by hundreds of ICO investors get ready to be surprised by the feedback your actual product will generate.
Getting into the build – measure – learn cycle as soon as possible is therefore extremely important. A lean/agile roadmapping & product development process is a great way to incorporate structured learning into product development.
Tip: when hiring or looking for partners make sure they have a substantial product management competence.
Go on, you can do it!
I hope the 8 minutes of your time was well spent and you’ll take away some useful information. If you are currently in blockchain product launch, drop me a note– happy to advise or hlep. It’s firstname.lastname@example.org.