- Cryptocurrency startups are fairly new in the zone of tech innovation. It’s natural to commit many mistakes.
- Common mistakes include not analyzing technical weaknesses such as trading volume, tokenomics, blockchain operations, user retainment, and many more.
Some of the common mistakes by cryptocurrency startups are in product management, resource management, and blockchain operations. Sometimes, the entrepreneurs may overlook indicators such as monthly active users, trading volume, TVL, tokenomics, etc. Weak marketing strategy and not building an industry network, community building could create hoops in the path.
Another important one comes when the entrepreneurs cannot identify efficient usage of the blockchain network and how much is needed, leading to unnecessary costs that could be avoided.
Cryptocurrency startups are on the rise with the increasing adoption of DeFi. As it is with any industry, beginners commit many mistakes. Some mistake patterns are fairly common. In this article, we’ll explore common avoidable mistakes that young crypto enthusiasts make while starting their own companies.
Poor capital management
Reckless handling of funds: After succeeding at finding investors and venture capitalists for your business, your duty is to prioritize your business decisions as to where the funding should be spent. Always focus on the primary business, which is your cash cow, to start generating revenue. Direct all the operations and conduct hiring only related to your primary crypto-related product.
Over-raising: Instead of over-raising, gradually scale your business by onboarding investors as you move along. Raising capital more than what you can efficiently expedite, might add to your liability as it will incentivize you to allocate resources to wasteful aspects of the business.
Keeping all your eggs in one basket: Diversify your assets if you see a good inflow of cash from investments, crowdfunding, sales, revenue, etc. Companies that put their money in FTX, and the Mt. Gox heist can give sound reason to pay heed to this age-old advice.
Cold storage, multiple wallets, escrow, multi-sig, etc. can be ways to use the resources available in crypto. Apart from that, as a company, you can seek a wide range of instruments as well. A secure platform is always more welcoming to investors as well as clients.
Product Development and Management Mistakes
Not establishing a USP: Work up a Unique Selling Point for your business to avoid competition and attract a customer base. Make sure that your business has practical use cases for the claimed solution to the problem statement. Standing out from the crowd is the only way your business can thrive in a market with longstanding providers already.
Not giving enough attention to technical indicators: It is always advisable to have a token or adopt an existing one as native to your business if you want to scale up your business in the long run. Pay close attention to the trading volume of your native token and incentivize activities that aid in increasing company valuation, market cap, and Total Volume Locked (TVL).
Another crucial indicator is Monthly Active Users (MAU). Attracting users to your platform is just one part of the job. Retaining them every month is what is the litmus test for whether a dApp will work or not.
If you have your own token, having very effective tokenomics is the key to unlocking huge profits. Constantly upgrade tokenomics, incentivize native tokens, staking rewards, token yields, token burn mechanisms, percentage-wise ecosystem allocations, community benefits, etc.
Pushing the product before it is optimally operational: Many startups make the mistake of pitching ideas and potential capabilities of their products before they are operational. Investors only like to invest in projects that have an up-and-coming product at hand. Also, making huge promises before the product can create value in the market does more harm than good to the company’s reputation.
Not developing a proper mobile app: Most traders, inventors, developers, etc. access dApps through smartphones only. Mobile is the primary medium to access DeFi for users in developing nations.
Most everyday users also prefer mobile apps over opening their PCs every time. So whatever your product is, make sure you develop an app accessible over most cell phone operating systems. The app should have a clean UI must be very much user friendly for a good UX, and must be fast and secure.
Misunderstanding and improvident use of blockchain: Don’t jump on the blockchain bandwagon just because it’s hyped. Don’t use blockchain if you don’t have to. There are a wide range of offerings in the market. There has to be a clear understanding of where blockchain can enhance the business and where it’s just a waste of resources and complicates the processes.
Failing to create a unique brand identity: Whatever your USP is, make it loud and clear that the company stands on its groundwork. Establish expertise in it. Develop a thought leadership strategy for it. Hire professionals with expertise in brand management and strategy who can create a solid brand identity for your startup.
Lack of a solid marketing strategy can fail businesses despite innovative ideas, solid technological background, and decent products. That’s what happened with New Coke and Volvo’s Phaeton.
Product is undoubtedly the soul and identity of a business but marketing is an aspect that a startup cannot afford to underestimate. An expert marketing team is essential to identify consumer patterns, user base, and user behavior and come up with creative marketing campaigns.
Neglecting the Power of Networking
Not Being proactive to engage in industrial networking: Networking could be a form of highly effective marketing. Make sure that you or a company representative attend as many Cryptocurrency and blockchain-related events and conferences as possible. This will not only help you make valuable connections to leverage your business deals but also give you a chance and platform to talk and raise awareness about your business.
You also get a chance to get honest, insightful in-person feedback from industry experts, potential customers, and investors. Networking with other startups, technocrats, and innovative, creative, and intellectual thinkers, and interacting with other people working in the same field significantly helps in accelerating growth. These can also be excellent platforms to attract VCs and tech evangelists.
Foster relationships with industry influencers. This helps in promoting the company. There have been instant price rallies for many startups in the past just because a key influencer commented, tweeted, or posted about a certain company. They can even help your startup with PR.
Another key point to remember is — don’t be anonymous. Constant interaction with customers and business partners gives a “human factor” to your startup, which not only increases visibility but also builds reputation. Always have an “Our Team” page on your website to give a face to the company.
All of this is essential to the business, especially because — a creator wanting to remain anonymous sends alarms ringing to the users, given the past experiences of scams and rug pulls rampant in the Cryptocurrency industry.
Lack of hiring diligence: Human capital is just as important for a startup as financial capital. In the initial days of a startup, when payout may not be comparable to established businesses, it’s hard to attract talent to work for you. Therefore, a well-thought-out and built-up hiring process is vital.
The founders must themselves examine the applicants, for the chances are that the candidate may not fully understand the specific nascent technology of the startup. Partner with a VC who can bring a pool of crypto-specific talent via their network and carry out a scalable talent practice. A recruiting agency might also be very helpful who has previously worked with people in the field.
Another technique that would be specifically helpful for Cryptocurrency startups is an Applicant Tracking System (ATS). It aggregates all candidate data on a centralized system to track and source potential employee profiles. It will build a network of trained and specifically experienced candidates in emerging Web3 technology.
Lack of connection with the audience and community building: The whole concept of decentralization, based on cryptocurrency, means that the power resides in the entire community involved in the ecosystem. Get involved in the Cryptocurrency community to retain the goodwill and trust of users.
This also fosters an emotional connection in the community which helps in long-term sustenance. Engage with them on platforms like Twitter, Reddit, Quora, Tumblr, Pinterest, and YouTube. It works like a reminder, promoting your business and reassuring the public about the startup being in a healthy and active state.