How Likely is it That a Blockchain Project Will Succeed?

We hate to break it to you, but the blockchain market is extremely unforgiving. Whether you are a project just starting out or one that is facing a rough patch, we don’t think this article will be good news for you.

Recently, Bitcoin.com published an article about the likelihood of a cryptocurrency project succeeding based on how and when it was backed. Keep reading as we delve into the details and expand on the information in the article to give you the best chance of knowing whether or not your blockchain project will become a success.

1. How Much Venture Capital Do You Have?

In the Bitcoin.com article, it was discovered that the amount of capital a blockchain project had vested directly relates to its future success. This honestly isn’t a surprise because, in general, projects that have more capital to spend just tend to do better, no matter what the industry.

Look at it this way, even Elon Musk received a large influx of cash from his parents when he was just beginning to pursue Tesla. While his ideas are solid, we can’t help but think he wouldn’t have been successful without the large cash injection at the advent of his business ventures.

But, back to Blockchain, in the article it was specifically found that ventures with over $50 million in cash during the venture capital investing rounds were the ones that succeeded. In fact, at this amount of venture capital investment, most projects tended to succeed rather than fail. Of course, this was a very small sample, as very few projects reach this level of capital. But in the course of the study, the failure rate was less than 2%.

Unfortunately, projects with less than $5 million in initial capital had extremely high failure rates, with the majority of projects failing rather than succeeding. With this little of capital available to them 33.95% of projects fail, or are failing, while 19% are already dead. While this isn’t rocket science, it is easy to see that failure rates are massive when a company doesn’t have enough working capital to weather the hard times.

Overall, 77% of blockchain projects fail to generate more than $1,000 USD per month and 45% cease operations entirely.

2. Who Is Investing?

Besides just the amount of capital, Bitcoin.com also found a correlation between project success rates and who was providing the capital. Like with the aforementioned economic aspect, this also makes sense as individuals who are knowledgeable about the industry have far more to provide a blockchain company beyond capital alone.

Additionally, certain investors are well known for taking large risks, while others remain conservative, meaning this specific statistic also carries a large confirmation bias. That being said, below are the individuals and their success rates when investing in blockchain:

·      Arthur Hayes: 73% success rate

·      Stani Kulechov: 70% success rate

·      Santiago R. Santos: 62% success rate

·      Balaji Srinivasan: 60% success rate

·      Sandeep Nailwal: 51% success rate

Of course, it can be easy to say that any blockchain company should pursue Arthur Hayes for capital, but remember that you have to convince these individuals that your project is a good idea. Arthur Hayes may as well be the hardest to convince because he doesn’t take on as risky of projects as the other investors.

3. Who Do You Have Working on Your Project?

Beyond just capital, in order to have a successful project you need to be working with the best of the best. Even if you can’t afford to hire someone like Arthur Hayes full-time, even just paying for a few hours of consulting can go a long way.

One of the major fail-points of new businesses is when they pay for things far before they are ready. Try to focus your initial capital on creating the best product, and then worry about upgrades after you have some funds rolling in. Any viable consultant or engineer will tell you this, and if they try to tell you something else—run.

4. What Funds Are Spent on Marketing?

Many individuals start out with a business idea that they think is so good that people will just find them and love them. The reality is much different. One of the largest reasons more capital equals more success is that fact that these businesses have more money to spend on marketing.

If your blockchain business doesn’t have any money to market, then you can’t expect any success. Unfortunately, the blockchain world is flooded with numerous “good” projects, and if you have any hope of surpassing Ethereum, you need to spend the time (and money) to convince your buyers that you are indeed the best.

Remember, the best marketing is not cheap or free. Be prepared to pay some high rates to bring your token to the market.

5. The Security of Your Token

The last aspect in deciding whether or not your blockchain company will be a success is its security. There are so many malicious actors in the world, that even if you have the best product, one wrong move can send your business spiraling. Don’t believe us? Check out the Terra Luna Collapse.

As mentioned above, allocate your time and resources to develop a minimum viable product for the market, but don’t overlook security. If you spend on nothing else, ensure you invest in at least a basic pen test to ensure hackers cannot steal everything from you at a moment’s notice.

Of course, it is impossible to prepare for every failure, so even after a pen test, ensure you have some sort of barrier in place in case things do go wrong. For example, withdrawal limits can go a long way if someone is able to support a yet undiscovered weakness.

Overall, it is impossible to predict whether or not a blockchain project will be successful, but with these basic steps, we think you can make a pretty good guess. So next time you are considering an investment, check the money, where it is coming from, and the people behind the project. If all those check out, then discuss both a marketing and a security plan. Best of luck!