I won’t buy Cryptocoins to use your service (1/2)
A few weeks ago I was at a startup conference and the inevitable happened: I met a talent-marketplace (hire-a-freelancer) startup that planned to sell their own crypto-coins to be used as tokens on their platforms before launching their product…
Me: Why would I buy your coin / token?
Founder: To use the service and pay for the freelancers
Me: But, why can’t I pay in dollars?
Founder: But that’s the whole point…
Me: I don’t get it. Why would I use your service if I need to buy a specific coin and carry the burden of all the exchanges…
and it’s true, I won’t. Nor will anyone else.
The craze of crypto-currencies is in it’s peak; there are over 1,500 coins listed on CoinMarketCap. It doesn’t make sense for an individual to have a wallet full of coins and tokens lying around in case they need to use one or the other, add to that the accumulated cost of moving the coins and exchanging them.
In the example above the founder was hoping to use his token as a currency, but had forgotten one small glitch: the user. A talent marketplace requires a high adoption rate to survive as it makes money from taking a small percentage of payments and occasionally advertising (other revenue streams apply, but these are the most straightforward). For that, the founders need to aim for high adoption and retention rates, and decrease barriers of entry.
As a first time user, the need to buy a token to access the service is an immediate obstacle.
- How many companies/individuals that hire freelancers have access to crypto-wallets, coins, etc?
- How many are willing to buy coins that they may or may-not choose to convert back to ETH or BTC later.
- You have already lost the client to thinking of how they’d get into your service, instead of placing the solution to their outsourcing problem at the core of your offering.
Major tech companies and upcoming ones are, will, and have considered ICO (Initial Coin Offering) as an alternative funding method to traditional investors or IPOs (with their lengthy processes). However, we are in the peak of hype over crypto-currency, and it’s still a super high risk enviroment. As an idea stage startups, the odds are already against you, so unless your startup’s core function is crypto-related, maybe it’s best you focus on your business.
There are many technologies that will disrupt the market and the rate of change will only increase in the next few years. Founders have to embrace changes and adopt new technologies on the go, but they also need to take calculated steps that they won’t regret.
Are you considering launching an ICO, considering the following:
- How will this affect my core business?
- How will this make the consumer experience on my platform better?
- Am I forgoing potential venture capital support (financial and non-financial) that could help grow my business?
- Can I withstand an un-forseen drop in overall crypto-valuation?
- Do I understand how this technology works well enough or will I be at the mercy of my developers. Can I hire, retain and grow the right team to help me on this path?
- If I’m paid in crypto-coins by my network, how do I plan to pay my existing non-crypto liabilities? Can you liquidate?
My two cents: Most people will pay for your service or product in their respective currency, your system will token-ize that value and run the service as needed. The average consumer will not need to know how, where and why. Your system will need to be optimized for the customer’s most seamless experience and your products best productivity.
P.S. I do own some cryptocurrency (BTC and ETH). I’m not against crypto-currencies, I just see that the hype is deluding startup founders’ attention a tad too much.