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Part 4 = Creating A New Venture In The Blockchain Economy

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The lead actor in the Blockchain Economy is the entrepreneur. Or as Teddy Roosevelt put it, it is the man in the arena that counts (updated = the woman in the arena). All the other actors – investors, customers/users, employees/contractors – depend on the entrepreneur’s willingness to work so hard against the odds. So we devote this chapter to the entrepreneur.

This is Part Four of The Blockchain Economy serialised book. Part Four is where we focus on creating a new venture in the Blockchain Economy. Part 4 only has one chapter because we refer back to Parts 1, 2 and 3. Also we have no ambition to write generally about being an entrepreneur; this is specific to building a venture in the Blockchain Economy. For the index/table of contents of The Blockchain Economy book please click here.

This chapter covers 6 key questions that entrepreneurs need to ask

Before you do anything else, you need to figure out what is your market entry space that nobody else cares about

What is your market entry space that nobody else cares about?

This is not specific to Blockchain. The basic idea is explained by Peter Thiel in Zero To One. Given how many pitches still show a plan to get 1% of some massive market, it is clear that the idea is not widely understood. As Peter Thiel puts it, it is better/easier to get 90% of a $10 million market than 1% of a $1 billion market – as long as that $10m entry market is adjacent to a much bigger market. So you need a market that sits at this intersection:

The two iconic examples are:

You need the intersection of all three. If you just have a tiny market that nobody cares about, be prepared to bootstrap the business; you may have a very nice lifestyle business but investors won’t be interested. If the entry market is part of a much larger market (such as eBay Power Sellers being part of a market of people wanting to sell online and Book Buyers being part of a market of people wanting to buy everything online), you will have two options after you have proved your market entry:

The idea is similar to what you find in Crossing The Chasm and The Lean Startup. These ideas are not specific to Blockchain, they are golden rules for entrepreneurs in any market. The rest of this chapter guides the entrepreneur through the Blockchain specific questions, starting with where in the Blockchain stack do you want to play? This is where you focus on the third circle in that venn – you know that the opportunity is for real.

First you need to decide where in the Blockchain stack do you want to work

Where in the Blockchain stack do you want to work?

If you are technical, the natural inclination is to work at the infrastructure layer. You will be building solutions for other developers and delivering via an API. If this is your focus, Part 1 of this book is mainly for you. You will need to understand Part 2 for your Go To Market phase, but mostly you will leave that opportunity to partners. Before leaping into this part of the market, ask yourself these two questions:

If you have experience in an end user market,  work at the Application layer (and read Part 2 of The Blockchain Economy.  Blockchain changes everything. Part 2 looks at the impact of Blockchain on 22 markets that together are worthy of the tag “everything”; they pretty much account for global GDP.   You may use one of the platforms at the infrastructure layer to build your product but your focus is 100% on that end user market.

If that is your focus, the first question is where is your market in Creative Destruction 7 Act Play?

Where is your market in Creative Destruction 7 Act Play?

Timing matters more than any other factor in startup success. If you are not convinced, watch this 6 min Ted Talk for the data.

Although history does not repeat, it often rhymes. You can spot these patterns throughout the history of disruptive waves of change. Please refer to Part 2/Chapter one describing the Creative Destruction 7 Act Play.

Think about which Act  your market is in. Then think about tIming:

How will you fund your MVP?

Shhh, don’t tell anybody. This is a secret – MVP risk is minimal. You would not know that from the legions of VCs who run a mile from funding product risk. The cost of building an MVP product has fallen about 100x since the Internet brought us open source, open APIs, minimally priced cloud/SAAS services and decentralised development teams.

As Legacy VC don’t want to fund MVP risk, 5 types of people who understand that MVP risk is minimal have jumped into that open window:

Is your Blockchain use for real?

Unless there really is an urgent and big need in your market for a permissionless transactional network without any institution in control, drop this idea. Do not make the mistake of using Blockchain to build a very, very slow and expensive distributed database. 

Or are you using Blockchain as a buzzword to unlock funding? That is OK if your core competency is fundraising. 

Is fundraising your core competency?

There are many who mock those who use a hot trend (Blockchain, AI, IOT, etc) to unlock funding. To those with an engineering mindset or a passion for building something of long term value is the mantra. If fundraising is your core competency, there are many opportunities to be a source of capital when the market turns bearish. This sounds cynical, but it is quite practical and can be quite transparent if done well. If you partner with investors, you are doing the hard work to make them money while being honest that there maybe a lot of experimentation (“pivots”) before you get to Product Market Fit). 

Bernard Lunn is the CEO of Daily Fintech and provides advisory services to companies involved with Fintech (reach out to julia at daily fintech dot com to discuss his services).

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For the index to Bernard’s serialised book, The Blockchain Economy, please go here.

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