The blockchain technology that appeared in 2008 with the introduction of Bitcoin is developing approximately five times as quickly as the Internet did. It even went through its boom and bust periods more rapidly than the dotcom mania did.
Today, the ICO hype is over, and, just like with the dotcom bubble, we have seen many companies fail. Many hope to see revolutionary Google-like and Amazon-like blockchain-based solutions appear from the surviving startups. Some of the venture capitalists who have influenced the Internet boom, such as Marc Andreessen from Andreessen Horowitz and Timothy Draper from Draper Associates, share this hope for the blockchain industry.
Enterprise software is estimated to be a $457 billion market in 2019, and blockchain solutions will eat part of it. Given the blockchain market fatigue that we are noticing, where do we stand with the significant “technological revolution” that the true blockchain enthusiasts have promised?
Many blockchain startups have already run pilots with famous brands and even formed partnerships. Among the participants, several large brands have announced pilots, including BMW (pilot with VeChain), Walmart (pilot with VeChain), and BNP Paribas Bank (pilot with R3). Others, like Factom, have been awarded funding by entities such as the U.S. Department of Homeland Security to develop blockchain systems that help these entities explore the application of distributed ledger technology. Despite all these pilots, partnerships, and announcements, actual deployment and adoption of blockchain innovations have so far not persisted on an immense public scale.
As an entrepreneur myself, I experienced challenges regarding the deployment of the new blockchain-based technology. Given the importance of the topic, I want to share my observations about the advantages and disadvantages of selling an emerging tech.
Are You Obsessed With Blockchain?
While it seems great that so many blockchain and cryptocurrency enthusiasts obsessively support the new distributed ledger technology, Brad Garlinghouse (CEO of Ripple) points out that the obsession is unhealthy. Too many people believe that distributed ledgers alone can be a solution for every obstacle. However, before that can happen, the customer’s specific problem must be clearly defined. Garlinghouse pointed out, “What’s missing in the crypto ecosystem is a customer fixation.” He went further to outline that a common question running around Silicon Valley today is, “Are you technology in search of a problem or a problem in search of technology?”
Early on, Ripple realized that its innovation and brilliance would fall short without successful sales and a focus on one product, which, in the company’s case, became a B2B settlement product for banks. Fortunately, Chris Larsen (Executive Chairman of Ripple’s Board of Directors) and Brad Garlinghouse were able to think of a way for the blockchain tech to work with large enterprises successfully.
Of course, finding a fit between the service and the customer is tricky. One needs to clearly communicate an existing problem that his or her company’s technology resolves. In Ripple’s case, the firm first offered a settlement solution to its institutional clients (banks) to help them decrease the amount of time needed for cross-border transactions. Then, Ripple introduced these clients to its “on-demand” liquidity service (which involved the use of XRP cryptocurrency) to help them solve a long-standing liquidity-related problem.
The above case shows that banks were initially afraid to use a cryptocurrency-enabled liquidity solution. In a recent Off the Chain interview with Anthony “Pomp” Pompliano, Garlinghouse shared how, after using the main settlement product, some of the banks would eventually warm up to the idea of cryptocurrency-enabled services.
Similarly, when a Fortune 500 company signed an agreement with my firm, the counterparty did not care much about the blockchain being a part of the infrastructure. Instead, the company was more interested in a particular pain point that it wanted to be fixed with a solution.
Although the majority of enterprises are afraid of anything related to crypto, they sometimes like to make choices in favor of new tech to tackle long-standing problems. In such cases, it is often necessary for a service provider to skip all of the blockchain jargon and speak the language of “benefits.” Most importantly, just like with any B2B sales, there needs to be trust.
Blockchain Opens The Door, But It Is Not Enough
While blockchain technology and the valuable potential that it shows help open doors to large corporations, the tech itself is rarely the sole reason for closing the deal. You will often see prominent blockchain projects with big-name partnerships, such as the Enterprise Ethereum Alliance (partnership with LG CNS), R3 (partnership with Mastercard), and OmiseGO (partnership with Nomura). However, while partnerships can look great for press releases and MOUs can help the participating parties seem like they are progressing, a vast number of such activities rarely result in anything of public substance; additionally, such “agreements” do not significantly impact crypto prices anymore. Of course, the outcomes are not solely the faults of the startup founders.
Every serious enterprise has blockchain advocates and enthusiastic leaders who take a variety of initiatives. Corporate leaders are often excited about emerging technologies and decentralization, and such executives can even be part of the blockchain community. They reach out to startup owners and engineers to learn more about emerging tech and to make changes within their own organizations. By doing this, corporate leaders become innovative pioneers within their industries. Startup founders seem to view such engagement as beneficial, too. They are willing to dedicate time and resources in pursuit of pilot opportunities that compensate with a “status symbol.” It seems obvious that websites and decks of rising startup stars look especially attractive when there are logos of reputable companies.
My company ran into a situation that was similar to one that was faced by Martin Casado from Andreessen Horowitz: we received mixed signals when engaging with the market. The media was writing a lot about our blockchain-related achievements; like the case mentioned in the Andreessen Horowitz article, “everyone was excited to talk to us, and many even paid for proof of concepts (PoCs) and/or fees for conducting pilots.” However, for blockchain companies, which received a massive amount of calls and much public discussion in 2017 and 2018, these signs of interest could just be mixed signals.
Startups with new emerging concepts can close PoCs and some relatively large contracts just because big brands are seeking to experiment with these technologies and are willing to be educated by the startups. However, these educational services dollars do not necessarily signal the real start of adoption. In other words, opened doors are not enough.
To summarize my observations regarding selling blockchain tech to enterprises, I have made the below list of three tips that I would like to share with others who are involved in the adoption of blockchain-enabled enterprise products.
1. Explain How Your Technology Tackles An Existing Billion-Dollar Problem.
In his panel speech during a PropTech CEO Summit, Paul Levine, a partner with Sapphire Ventures, noticed how the majority of key players in real estate focus on “the front end” automation of listings and other data as part of their business models. However, according to Levine, there are barely any companies that offer automation of the real estate transaction itself; this is currently an enormous opportunity for startups, brokerages, and VCs.
Articulation of a real pain point within an industry or an enterprise is the first step toward identifying a solution. The solution should not be something that is just “nice to have.” Additionally, it should not represent an unrealistic concept that will only work in “a world where everything is decentralized.”
I realized that, with enterprises, blockchain tech is very suitable when my company deals with the specific pain points of extensive cyber fraud and the need for instant settlement (of values, rights, or assets of an archaic nature). I also realized that settlement as a solution is applicable for many high-value assets such as cars, houses, and boats; this is because we are not dealing with a physical asset but a digital one, which, in my company’s case, is the certificate of ownership. Today, the ownership of high-value assets is represented by legal papers and digital titles; you “own” the asset if you are there in a database.
Despite my enthusiasm for blockchain tech, I like to emphasize a common sense solution to a problem related to the current complexity of the real estate transaction process. When speaking, I always try to clarify that my company is not just a blockchain startup but a firm that automates real estate transactions. To achieve my company’s specific vision, the use of blockchain technology has undoubtedly helped, but it was far from the sole reason for my company’s existence. Distributed ledgers are just a piece of the technology stack that helps to solve the problem.
2. If You Can Sell A Product Without Mentioning Blockchain Or AI, Then You Tackle A Real Problem.
The adoption of new technology accelerates when there are more participants in the space. Just like the first individuals who saw the invention of the telephone and were skeptical because there was no one to receive calls, enterprises may be suspicious of anything relatively new and unexplored. Many organizations have hired dedicated teams to experiment with emerging technologies or have established “Innovation Hubs” for this purpose. For example, this year, the US NAR (National Association of Realtors), with which my company works closely through the REACH program, hired a team of technologists (Glenn Shimkus, Dave Conroy, and Dan Weisman) who understand emerging tech and help spread educational messages around to real estate professionals.
However, while some leaders within an organization are enthusiastic about the immutability of the blockchain, others within the same organization fear the decentralization focus of the movement and the regulatory uncertainty around cryptocurrency. (I will note here that Blockchain and Cryptocurrency are legal and defined by many laws in the United States). Thus, you would make the lives of the relevant decision-makers easier if you do not overcomplicate your sales conversations with emerging technologies (unless they ask for it). If you can explain your product without mentioning blockchain, smart contracts, AI, or machine learning, then you are probably able to articulate the pain points and solve a real problem.
Many projects try to use fancy words in an attempt to sound innovative, but it will not help you make money. Buzzwords such as “blockchain” are nice to use, but enterprises will pay for a solution to a real problem.
3. The Number of Big Logos Does Not Matter. Aim For Deployment Of Contracts And Transactional Volume.
In the interview mentioned above, Brad Garlinghouse outlined how Ripple’s key performance metrics changed from the number of contracts to actual product deployment and, finally, to the volume of transactions.
It was not enough for Ripple to announce that well-known banks were signing agreements with the company. Deployment and getting started on generating a large volume of transactions are very important, which I realize with my own company now. These steps need just as much persistence and work, if not more, as prospecting for leads does.
The technology needs to be deployed, as well as adopted. Thus, more resources should be invested in moving forward after the agreement is signed. Fortunately, unlike with retail software, enterprise software almost guarantees product adoption, and you can grow both your revenue and the number of customers. It takes more time, but solving the real problem for enterprises’ pain points will get you to the next level; it is the rule today and the inevitable path for traditional SaaS B2B projects.
Why is it important to sell to enterprises and have a high volume of transactions? It is because achieving volume is essential for the profitability of a company that offers SaaS and for the network to keep validation and data storage sustainable. Enterprise sales are necessary for the adoption of emerging technology, ultimately spreading the tech to millions (and perhaps billions) of consumers. For example, the solution that is being offered by Ripple makes cross-border payments shorter and cheaper. In the age of globalization, liquidity is vital for many people who send money to their families overseas and make critical investments abroad for education or properties.
In the case of real estate, if enterprises such as brokerages or mortgage providers adopt a blockchain-enabled technology, it means that the consumers will have their property rights protected and that they will close property transactions much more quickly and cheaply without paying billions of dollars to the gatekeepers of very fragmented databases. The adoption could prevent many of the types of losses that businesses and consumers have today, as well as situations that are similar to the financial crisis of 2008.
The next time you talk to a big logo enterprise that is excited about your mission, forget about buzzwords like “blockchain.” Instead, focus on the real benefits and empower the enterprise to close the deal and start deploying your company’s product. Then, develop use cases with your customer success team, and let this be your main selling material.
The wide adoption of a new technology comes with “small wins” that tackle large-scale problems. Focusing on attainable and measurable objectives is the key to achieving high transactional volumes. The players that offer tangible solutions to billion-dollar issues will have higher chances of staying afloat and succeeding in the entrepreneurship arena.