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What Blockchain Investors Look for in a Startup

Chris Porteous
Chris Porteous
Co-founder and CEO at Framestr

For blockchain entrepreneurs, funding poses some thorny challenges.

Getting funding for their startups is not an easy feat for blockchain entrepreneurs.

Despite the rising prevalence of blockchain in today’s world, it still isn’t enough to push blockchain to the forefront of investment. More startup companies are turning to outside funding in order to gain the money they need to run their digital business.

Unfortunately for them, it's not that easy to ask investors to fund a blockchain startup. This is what blockchain investors look for in a startup before they decide to take the plunge.

1. Real innovation

Blockchain may be an innovation all in itself, but that isn't enough for investors who want real innovation from an individual company.

Real innovation, in this case, can be defined as something new and unique that a company has managed to come up with using current or upcoming technology. Blockchain is a technology that can potentially contribute to the modernization of our businesses and our economy. And it's evolving very fast.

Based on this statement, it would seem like investors are the ones without enough projects to invest in. If entrepreneurs can focus more on developing their blockchain-capable businesses, they will be able to attract investors who are specifically looking for something new created out of blockchain technology.

2. Tech connectivity

Investors are not interested in using blockchain in isolation. They are interested in seeing how blockchain can be used in relation to other technology, such as artificial intelligence.

Although both have remained as stand-alone technologies in the last decade, more and more academics have been trying to combine the two. The convergence of blockchain and artificial intelligence could lead to several benefits in various sectors, including healthcare and finance, the two sectors that see the most identity fraud cases in recent years.

With blockchain and AI integrated together, companies in these sectors can create an encrypted method of storing sensitive data that can then be securely unlocked using the knowledge and sophistication of AI.

This is just one example of the way blockchain can be used to improve existing technology and even create a new technology altogether.

3. Useful solutions

Investors are also interested in a startup that can suggest and develop useful blockchain solutions that even the mainstream public can accept and adapt.

Many companies use "blockchain" as a buzzword to entice investors, which is why many investors tend to avoid them. These investors prefer companies or projects building something with the core value that comes from a set of functions native to blockchain and cannot be attained in the absence of blockchain.

4. Valuable data

Another thing that investors look for in a startup is valuable data. Valuable data can lead to valuable discoveries and, at the same time, help create projections and forecasts for specific startup products. Any serious investor prefers to invest in a product when it’s still fresh on the market, as long as its forecasts are positive.

One of the biggest problems with blockchain startups is that they try too hard to look for problems to solve, instead of solving problems that are already in front of them. Investors want someone with a clear vision for what they're building, a balanced skill set, and an ability to get things done.

5. Attentive founders

Lastly, investors are attracted to startups with founders who are attentive to industry happenings and quick to adapt their businesses based on current situations.

The reason for this is twofold. One, staying updated on whatever's happening within the industry ensures investors that the founders themselves are interested in blockchain and thus motivated to improve the sector. Two, knowing how to adapt to remain sustainable and profitable is vital in running a business in the digital realm.

Just using the word "blockchain" in your business proposal is not enough to secure funding from investors. If you can integrate all these factors that affect the decision-making process of investors, you'll stand a better chance of getting your company funded.

Image Credit: Life and Times/Shutterstock
Chris Porteous
Chris Porteous
business.com Member
I'm a serial entrepreneur and owner of three internet ventures, including My SEO Sucks. A contributor to ZeroHedge, Entrepreneur.com, Forbes, Inc.com, and dozens of other media outlets, I believe in SEO as a product. I developed a proprietary technology fueling the #1 rankings of My SEO Sucks clients. In guest speaking ventures across North American, I advocate for organic search traffic as the backbone of any comprehensive digital marketing strategy.