As blockchain technology continues to evolve and grow in popularity, it’s becoming increasingly clear that its potential is not limited to just digital currency. In fact, the mechanisms behind blockchain could prove to be a game-changer for businesses across a variety of industries.
While this is still a relatively new and unexplored frontier, many companies are already exploring the possibilities that come with using immutable, distributed ledgers.
In addition, the emergence of blockchain-powered decentralized autonomous organizations (DAOs) has given rise to the world’s first Internet-native business entities. This exciting development offers new opportunities for businesses of all sizes.
Of course, launching any startup is a challenge, but launching a blockchain startup is particularly difficult. However, with the right plan and strategy in place, such an organization can tap into a wealth of opportunities that would otherwise be unavailable.
Overall, it’s an exciting time to be involved in blockchain technology, and there are plenty of opportunities for businesses that are willing to explore this new frontier. So if you’re considering launching a blockchain startup, there’s never been a better time to do so.
Why start a blockchain business
Even though blockchain technology is still a relatively new concept, it has caught the attention of many people who are interested in exploring its possibilities. The blockchain can revolutionise how we store and share information, make transactions, and establish trust among players in a system.
It offers an exciting opportunity because it is fully digitized, doesn’t rely on a central authority, is easily verifiable, and, most importantly, immutable. The protocols and mechanisms that blockchain employs ensure enhanced security and reliability, which can be utilized greatly in numerous industries and could profoundly impact how business is conducted.
The applications of blockchain technology are feasible and applicable to many industries, including healthcare, supply chain, real estate, retail, and others. To create your own blockchain, there are a few key steps that you should consider.
Choose a blockchain business model
At the heart of any blockchain business lies the model it is built upon. In this regard, let’s take a look at some of the most popular blockchain business models that are suitable for enterprise organizations:
1. P2P Blockchain Business Model
The P2P Blockchain Business Model is based on end-users communicating with each other directly, without the need for intermediaries. This model allows startups to monetize their offerings through tokens, transaction fees, or Blockchain as a Service (BaaS) solutions.
2. Blockchain As a Service
The Blockchain as a Service Business Model provides businesses with an environment where they can manage their blockchain system.
For instance, Microsoft’s Azure, IBM’s BlueMix, and Amazon’s AWS offer BaaS services. Popular blockchain platforms like Ethereum and Bitcoin can also be provided as a service. Ethereum Blockchain as a Service (EBaaS) is a great example.
3. Token Economy Model
The Token Economy or Utility Token Business Model involves using utility tokens or crypto tokens to grant users access to decentralized platforms. Ethereum is a good example, as it is both a cryptocurrency and a utility token that provides access to the network’s decentralized computing service.
A business relying on this model will hold a portion of the utility tokens and discharge the rest for the sake of the network’s functionality. Profits are made once the utility token’s value changes.
4. Blockchain as a software
Blockchain-Based Software Products involve selling ready-made blockchain software solutions to other companies, who can integrate and exploit them based on their needs.
5. Development Platform
Development Platforms focus on designing apps that can give rise to blockchain infrastructure. For example, Hyperledger offers a set of tools, frameworks, and know-how for creating such platforms.
6. Blockchain Professional Service
Blockchain Professional Services is a model that is suitable for leading development companies that can provide bespoke blockchain solutions to smaller organizations.
To summarize, a blockchain startup can rely on network fees, a token economy, or blockchain-based software solutions to make money or even building blockchain applications. However, a blockchain startup must comply with the rules and regulations in its chosen jurisdiction to operate.
Tips for launching a Blockchain startup
1. Keep an eye on Market Conditions
When it comes to launching a blockchain business, bear markets can seem like an attractive time to do so. However, it’s important for founders to consider whether waiting for better market conditions is the best option.
To make this assessment, it’s helpful to evaluate the startup with the same criteria used by investors during bear markets. A strong roadmap with concrete deadlines and benchmarks is essential to demonstrate to investors that progress is being made and that the startup isn’t experiencing a slow decline. Failing to do so may signal to investors that the startup is on the brink of collapse, leading to a slow “rug pull.”
Taking the time to evaluate market conditions and the state of the startup carefully can help determine whether launching during a bear market is the right decision. It’s important to ensure that the startup is poised for short- and long-term success before diving into a new venture.
2. Opt for longer Vesting Schedules
In the world of traditional startups, it’s common to offer compensation packages to incentivize employees to perform well. Similarly, blockchain startups use a method called vesting during the presale period of an initial coin offering to provide their team, investors, and advisors the right to certain assets such as retirement and stock options. This involves locking and releasing assets, typically in the form of tokens, over a certain period.
3. Don’t Underestimate Crypto regulations
You’ll need external legal counsel with prior crypto experience. It’s risky and time-consuming to work with counsel unfamiliar with crypto, especially since you’ll need guidance on how to navigate legal boundaries if you’re setting up initial coin offerings (ICOs) and ensure compliance with anti-money laundering (AML) and know-your-customer (KYC) standards.
KYC protects projects by filtering out bad actors and it protects your investors as they provide highly personal information.
4. Grow Community
In the traditional Web 2.0 startup scene, selling a fully built product is common. However, in the web3 world of horizontal technologies, building relationships and establishing credibility is crucial before developing a technology.
Honesty is key when it comes to the progress of product development, challenges, and release timelines for the launch on the testnet and mainnet. It’s also important to prioritize the security of funds when launching the product on the mainnet by having reputable third-party companies conduct security audits.
Building strong relationships in the web3 world can be achieved through community engagement, attending relevant events, and collaborating with other projects in the same space. By building trust and establishing credibility early on, startups can attract a loyal following that will support them through the development process and beyond.
5. Explore your Funding Option
Blockchain startups have a range of funding options available to them, including traditional methods such as crowdfunding, angel investment, and venture capital funding, as well as specialized blockchain funding methods like token sales using an ICO strategy.
To connect with experienced investors, founders can use open-source databases of blockchain investment companies and attend relevant meetups and events.
7 Steps to Launch Your Blockchain Startup
Step 1: Identify the Problem You Want to Solve
Every successful startup begins with identifying a problem that needs a solution. Conduct thorough market research to identify pain points that you can address with your blockchain startup.
Step 2: Determine the Right Blockchain Platform
Different blockchain platforms serve different purposes, and choosing the one that best suits your needs is crucial. Consider factors such as scalability, security, and transaction speed when selecting a blockchain platform.
Step 3: Assemble a Team of Experts
A strong team is vital for any startup’s success. Assemble a team of experts with diverse skills and experience in areas such as blockchain development, marketing, and finance.
Step 4: Develop a Minimum Viable Product (MVP)
Create an MVP to test your idea’s feasibility and gather feedback from potential customers. Your MVP should demonstrate your blockchain solution’s core functionalities and showcase how it solves the identified problem.
Step 5: Secure Funding
Securing funding is crucial for any startup’s success, and blockchain startups are no exception. Explore various funding options such as angel investors, venture capitalists, crowdfunding, and government grants.
Step 6: Build Partnerships
Building partnerships with other businesses in the blockchain industry can help your startup gain exposure and access to resources. Look for opportunities to collaborate with other blockchain startups, industry associations, and established companies.
Step 7: Launch and Scale Your Blockchain Startup
Finally, it’s time to launch your blockchain startup and scale your business. Continuously gather feedback from your customers and iterate your product to improve its functionality and usability.
In conclusion, blockchain startups have various business models to choose from, including P2P, BaaS, Token Economy, Blockchain-Based Software Products, Development Platforms, and Blockchain Professional Services.
Before launching a blockchain startup, it is crucial to evaluate the market conditions, set up proper token metrics, vesting periods, and establish relationships with investors. Additionally, honesty about the progress of product development, challenges, and release timelines is essential to build trust with the community.
Finally, founders should perfect their elevator pitch and monitor blockchain press to connect with experienced investors and expand their network.