I would like to take a moment to comment on the recent fall in the price of BTS. In a word it all boils down to a very common problem in the world of startups, the cost of user acquisition is higher than our ability to monetize it under the current model. To convey my point I would like to quote some from this blog:
http://www.forentrepreneurs.com/startup-killer/However after closely watching several hundred startups that have failed, I observed that a very large number of these had solved the product/market fit problem, but still failed because they had not found a way to acquire customers at a low enough cost.
I would like to propose that in addition to team, product, and market, there is actually a fourth, equally important, core element of startups, which is the need for a viable business model. Business model viability, in the majority of startups, will come down to balancing two variables:
Cost to Acquire Customers (CAC)
The ability to monetize those customers, or LTV (which stands for Lifetime Value of a Customer)
Successful web businesses have long understood these metrics as they have such an easy way to measure them. However there is a lot of value in looking at these same metrics for all other businesses.
To compute the cost to acquire a customer, CAC, you would take your entire cost of sales and marketing over a given period, including salaries and other headcount related expenses, and divide it by the number of customers that you acquired in that period. (In pure web businesses where the headcount doesn’t need to grow as customer acquisition scales, it is also very useful to look customer acquisition costs without the headcount costs.)
To compute the Lifetime Value of a Customer, LTV, you would look at the Gross Margin that you would expect to make from that customer over the lifetime of your relationship. Gross Margin should take into consideration any support, installation, and servicing costs.
As a DAC many of us assumed that if we built it they would come. Our product solves so many problems in the crypto-currency space and leads in many ways, but it is currently failing because the cost to gain a new user is higher than we can afford with either transaction fees or dilution. In other words the only thing that can keep this ship moving forward is additional funding and a change to the business model of the DAC that so that it can generate more revenue per user than it costs to acquire a new user.
Fortunately for us there are many viable ways to both raise money, increase revenue per user, and lower the cost of acquisition. None of this can happen over night, but what matters it that we are AWARE of what need to be done and are actively taking steps to change the direction of this ship.
We have a well thought out referral program that will be game changing and that cannot be gamed. I would like to thank Max for inspiring our solution the details of which will come out as part of a new white paper. We will be increasing transaction fees, offering bulk discounts, and overall creating a system that will highly reward businesses and merchants that bring us customers.
The current low price is hard to look at, but unlike other crypto-projects we are actively looking at this as a startup and adapting as necessary to find the business model that takes us to the moon. Hang tight, invest in people and you will be ok. I am not giving up and know that we are innovative enough to eventually succeed in this space. It has been a learning experience, but fortunately I am a fast learner.
In our case the cost to acquire a new user is currently well over $100, we need to find a way to fund that while lowering costs.
Topic: Why BitShares isn't Taking off and What we are doing about it. (Read 56786 times)
