It is a self-evident economic truth that the SME sector, and specifically new businesses, are the life blood of any economy. New businesses begat new jobs which is always an election winner. Official Government figures show that the digital sector contributes £149 billion to the UK economy, and the sector accounts for 7.7% of the UK economy as a whole. More interestingly, pre-Covid recession, growth in this sector has been nearly six times larger than growth across the economy as a whole. Good news so far!
Indeed, the UK is upheld as the global HQ for fintech, and certainly a supportive regulatory body, and numerous start-up incubators have noble assisted some phenomenal success stories. Obvious examples include the phenomenal valuations ascribed to Transferwise, ($3.5bn) Monzo ($2.5bn), and Funding Circle ($2.4bn).
Alas, these leviathan valuations, are, of course exceptional. There are said to be 660,000 new companies registered in the UK every year, yet 60% of those new businesses will go-under within three years, and 20% will close their doors in under a year.
The fintech party is increasingly crowded, and finding a USP is crucial. It is interesting to note that many of the fintech success stories are not new ideas; neo-banks provide a better online experience than the old guard high street banks and the peer to peer sector is able to provide faster transactions and slicker service to borrowers and lenders alike. Moreover, they tap into the zeitgeist — the right product at the right time.
In my opinion, the crypto industry is hugely overcrowded. As a maturing industry, it is due a period of serious consolidation, particularly in the ever-increasing number of coins. At the time of writing, Coinmarket cap details over 6000 crypto currencies, whilst it is a fact that crypto is not viable if local traditional currencies are fit for purpose, this huge number of cryptos cannot last in the long term.
Crypto coins are best seen as individual communities. Digital currencies are simply a way of transferring value; hence why you often hear crypto referred to as “internet money”. Crypto as an investment strategy is gathering momentum — indeed some of the world’s largest hedge funds and asset managers are finally waking up and taking them seriously. Underpinning any coins long term prospects is the use case (the problem being “solved”), and as a secondary issue the community using it. The crowd, co-creates value through creating demand; for many of the immature coins, you can’t monetise it today, as we don’t know what it is yet! This is best demonstrated by the first crypto boom, where more hype than substance propelled more than 50 coins to a market cap of $1bn. Even within crypto circles this is poorly understood. It is interesting that today the top 3 coins make up around 70% of the daily traded volume. Clearly, this does not bode well for the other 5702 currencies. Indeed, there are in reality only a few uses cases: payment currencies, utility tokens, and security tokens. Whilst the industry is potentially worth billions, which coins will triumph is as yet unclear.
Dacxi’s niche in crypto is totally unique. Most coins are a pure “pump and dump” — there is often no incentive, beyond raising funds for an initial ICO, for a coin issuer to ensure the long term health of their coin. Unusually Dacxi retains an ongoing interest in the utility of the coin, as it underpins an entire economy, used in a global network of national crowd venture platforms. It provides decentralisation, the prime benefit for crypto, and the value remains in the hands of the coin holders. It is designed to benefit the crowd not the product or platform. The whole world is on the look out for the next ecosystem, and funding local businesses with a global crowd provides a potential market of billions in currency. Crowd funding is established, as is crypto: putting the two together will be an explosive combination.
In next week’s blog: Think Big, Act Small!
Read previous blog: Adventures of a Unicorn: Need for Speed & Valuation Madness
Adventures of a Unicorn is a business blog written by Katharine Wooller, Managing Director, UK & Eire, Dacxi.com. It documents the daily life of tech startup in hypergrowth. Dacxi.com is a unique crypto business in the crowd lending space.
All views expressed in this blog are my own and do not represent the opinions of any entity with which I have been, am now or will be affiliated.