Only 5 African Blockchain startups raised over $5M in 2018.African startups face a big challenge when it comes to raising capital. While we’ve seen the amount of money raised from African projects shoot up in the last year, blockchain startups are still few and struggle when it comes to funding.
Whether its raising from private investors or raising via an incubation program, African blockchain projects have a lot to learn on how fund investment managers work and what incubation programs look for in startups. The recent Aeternity hackathon revealed knowledge gaps in this area of the space.
Aeternity Blockchain Hackathon: No project was Accepted. Winning projects given one more week to refine the ideas: https://t.co/TrgCPQG80O pic.twitter.com/MpxmBq27Bh
— BitKE (@BitcoinKE) February 9, 2019
BitcoinKE is committed to building a thriving blockchain ecosystem in both Kenya and the wider Africa. Below is a curated list of tips on what, as a startup, you should be considering if your end goal is to get funding through an incubation program.
What Incubation Programs Look For
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Domain Expertise
Being an authority or expert in your particular area or field gives you a big edge when you’re looking to get incubated. A tech-heavy business, for example, has a better chance of funding if the founders and lead team is equally tech-heavy.
The same applies across other fields including business and marketing.
Experience is largely based on years of practice and know-how when it comes to operations around a particular field.
2. Blockchain Utility Use Case
As a blockchain startup, your startup needs to employ the blockchain in one way or another to solve a specific problem that only blockchain can solve.
In order to determine a blockchain use case, you might want to consider asking the questions below:
- Are you trying to remove intermediaries or brokers? (Yes/No)
- Is your idea connected to tokenisation of physical assets (documents, real estate,
etc) or virtual assets (fles)? (Yes/No) - Is it essential to keep the records permanently? (Yes/No)
- Do you require high performance rapid (~milliseconds) transactions? (Yes/No)
- Do you intend to store large amounts of non-transactional data as part of your
solution? (Yes/No) - Do you want/need to rely on a trusted party (e.g. for compliance or liability
reasons)? (Yes/No) - Are you managing contractual relationships or value exchange? (Yes/No)
- Do contributors know and trust each other? (Yes/No)
- Should transactions be public? (Yes/No)
3. The Market Opportunity
One of the key aspects of any solution is a problem case and the market opportunity that exists around the use case, and blockchain solutions are no different.
All successful blockchain startups that have been incubated solve a problem with a big market opportunity.
In order to determine the market opportunity, consider the following:
- The customer demographic
- The customer size
- Market valuation – Is it $100M or a $1B market?
- Can you determine if people need your solution?
- What substitutes exist due to a lack of awareness of the solution?
- What do you know that competitors don’t?
- How are you going to make money?
4. The Investment Cost
Incubation programs are also careful to determine how much is needed and how the investment will be used. To determine this, ask yourself the following:
- Do you have an MVP? If so, you stand a bonus.
- How do you intend to get the initial customers / users?
- How do your financial forecasts look like in terms of monthly burn rate, monthly cash flow, break even etc?
- How much actual funding do you need?
- What are the deliverables from the proposed funding?
- How many months is your runway?
- How much revenue do you need to break even?
- How many customers are needed to break even?
- What are your current milestones? Where are you in your milestones?
- Why should anyone invest in your project? Give 5 good reasons.
5. Learn to Pitch
While most developers and project teams believe that having a viable product is enough to get you funding, learning how to pitch is equally crucial.
Here are a few tips on how to pitch:
- Have a one-liner pitch. In order to do this, complete the sentence below:
“[Insert the project name] is developing …[a defined offering] ….. to help ……[a defined audience] ….. [solve a problem] ……. with …… [the secret sauce]….”
- Create a Pitch Deck
Create a presentation with atleast 3 slides for each of the points defined which are – Problem. Market. Solution.
6. Write Down Your Business Plan
- Your business plan needs not be complicated. Here is a simple way to come up with a business plan:
– One Line Pitch (max 140 characters)
– Summarize their business. (max 450 characters)
– Define customer problem. (max 210 characters)
– Define their market. (max 450 characters)
– Describe the solution they sell. (max 450 characters)
– Sales and marketing strategy. (max 450 characters)
– Describe their business model. (max 210 characters)
– List their competitors and natural partners in their ecosystem.
Once you have all of the above, you’re ready to start approaching VCs and incubation programs to get your African blockchain startup funded.
