…the Needs of Growing Blockchain Businesses
Blockchain businesses often lack essential management skills and the disruptive potential of the technology has created enemies. To grow beyond the startup stage, companies will need more diverse management teams and stronger allies.
There is no shortage of big names in the blockchain industry. Richard Branson and Marc Cuban, for example, have been invested in blockchain technology for a longer time.
Branson hosted a blockchain-specific meeting on Necker Island to discuss the future of the industry. Cuban has been an advisor to the chat app Dust, which plans on releasing a new blockchain-based messaging platform.
That said, most investors maintain a bird’s eye perspective and don’t get actively involved in business management. But what the industry needs at this point is not so much the investment capital, it’s more the operational know-how.
Blockchain firms need more management skills
Industry Insiders often cite a lack of talent as an issue of blockchain companies.
Mike Bodson, CEO of the Depository Trust & Clearing Corporation, said 70% of his clients are having trouble filling FinTech positions, including for blockchain.
The issue is not only with tech jobs, but also business management positions. Many blockchain startups were founded by talented engineers. But tech entrepreneurs don’t always have the business talent needed to grow their companies. Not everyone is as multi-dimensional as Mark Zuckerberg or Bill Gates.
“Many blockchain professionals in this space lack the business fundamentals, such as valuation models, people management skills, and agile project management best practices, which then hinders them from being commercially successful,” says Daniel Santos, co-founder of DARA.
FinTech is not only “Tech” but also “Fin”
According to Credit Suisse’s Head of Blockchain Development Emmanuel Aidoo, members of “traditional finance” don’t get involved with blockchain businesses, because they worry too much about the risks of the new technology.
Besides worries about risks, the size of the paycheck will most likely also play a role. Most startups cannot afford the handsome salaries that are common in the financial industry. However, as firms grow and become more profitable, that can change quickly.
Getting financial industry expertise on-board is paramount for FinTech-related blockchain startups. “Folks that really know how the process works today are going to be very important,” said Aidoo. He encourages finance professionals to consider blockchain companies as a career option.
Former BlackRock executive Saurabh Pathak is a recent example for a financial industry heavyweight transitioning over to a blockchain firm. He will be joining Blockstack, the company announced on last Wednesday.
Blackrock is the world’s largest Wall Street investment management company, with assets worth $6 trillion under management. Blockstack is a blockchain startup that is developing a “new internet” for decentralized applications.
Pathak himself oversaw $4 trillion in assets for BlackRock as controller for the Americas region. He was also the CFO of BlackRock Canada. Pathak will lead Blockstack’s financial controlling, accounting and reporting and help the firm to address regulatory and compliance questions.
As the industry grows, political connections will become increasingly important
Besides business, finance and tech skills, the growing blockchain sector will also need more political support. Blockchain – and especially cryptocurrencies – are all but popular amongst the current establishment.
Thus, having a strong lobby and political connections will play a major role in shaping industry regulations and erasing roadblocks.
In fact, blockchain businesses are already getting more connected with politics. In January, blockchain startup SETL announced that Christian Noyer, former governor of Banque De France and a prominent French economist, will join the company’s board of directors.
French regulators have recently granted the company a license to operate a central securities deposit system. Noyer will be of great value not only because of his understanding of the financial system, but also because of his political connections.
Stronger together: blockchain lobbying groups
Blockchain technology is about cutting out middlemen. But those who’ll get “cut out,” won’t like it. Especially cryptocurrencies pose a major risk for banks and other financial industry firms.
The recent World Economic Forum was a powerful display of how much the banking industry is lobbying against cryptos. If you plan to take on the world’s most powerful industry, you better find some allies.
Crypto companies seem to understand that and have started to band together and form lobbying groups.
In September 2018, the industry lobbying group Blockchain Association was formed in the US, including leading crypto companies such as Coinbase and Circle. It’s the first association in Washington that represents blockchain entrepreneurs and investors.
Likewise, some of India’s blockchain companies have built the Blockchain and Virtual Currency Association of India after the Reserve Bank of India had issued warnings against cryptocurrencies.
Yet still, those crypto lobbies are merely a drop in the ocean when compared to the power of the financial industry. But it’s a start.
The larger the blockchain industry grows, the more important becomes a multifaceted tech and business expertise as well as political connections. It will be a challenge for growing blockchain companies to attract the right talents and create an effective political support structure.