Getting Fit-for-Funding, real stories, how Dispatch de-risks as a blockchain protocol

How Dispatch de-risks as a blockchain protocol

Risk and reward are two sides of a coin for founders and investors. You just can’t have one without the other, ultimately. And you need to keep an eye on both parts over time for a startup to succeed.  

Unfortunately, I find that many entrepreneurs are way better at the “pursuing rewards” part of the equation than the de-risking side. So I want to cover the latter a bit in the next few posts, focusing on specific companies as mini case studies in how de-risking is done in practice. In part, this is my way to celebrate de-risking instead of dwelling on the frequent feeling that I’ve wasted time reviewing ideas that didn’t take steps to make themselves more Fit-for-Funding.

First up is Dispatch, a San Francisco startup building a blockchain platform to enable enterprise applications with the unprecedented performance, scalability, and security that are continually documented as current shortcomings of blockchains. Below is how Dispatch intentionally addressed de-risking in two key areas – product and market vision.

Product

Zero-knowledge analytics:  For Dispatch, de-risking in the product domain chiefly means differentiating itself among a frantically growing field of other blockchain protocol offerings globally. One of the crucial features they’re working on to set themselves apart is called “zero-knowledge analytics” – a novel approach to helping enterprises use data to improve operational efficiency.  They are aware they need to validate these efficiencies not only do happen but also add the level of value that will draw word of mouth and attract more companies to their platform.

The central principle of ZKA is that a company should be able to gain insights from data that they don’t have in hand per se, since it’s stored and encrypted on a distributed network. At a time when compliance demands on companies are growing due to new privacy laws like the European Union’s General Data Protection Regulation, Dispatch is designing ZKA as a real best-of-both-worlds solution. Enterprises can still draw on the power of data and analytics, but not have the burden of storing the data, worrying about privacy breaches, liability to users, possible regulatory fines, and so on. If this is highly beneficial for your project, drop me a note or add a comment.

DAPoS: As with any good software product, Dispatch’s new platform has some important algorithmic secret sauce working under the hood – another important acknowledgement by them to have a market differentiator. In Dispatch’s case, that algorithm is called “Delegated Asynchronous Proof of Stake,” and it’s used to verify transactions on their platform’s shared ledger.

Improving efficiency of verification, called “consensus” in the blockchain world, is a big issue for any new platform entering the space. Bitcoin’s “proof of work” consensus method, for instance, is responsible for its notoriously unsustainable energy requirements.

With DAPoS, Dispatch says it can achieve consensus orders of magnitude more quickly than more traditional methods like proof of work. If you want fuller technical details, check out this video they did summarizing it, or dig into their CTO’s whitepaper on DAPoS.  

Also of note, there is a need for new protocols to address compatibility. This is not lost on Dispatch, which at least offers backwards compatibility with Ethereum.

Market

Focus keenly on use cases that affect real partners and customers. Dispatch has pursued relationships with not only some notable players in the blockchain space proper -- like Fenbushi Digital and GenesisBlock -- but also with companies in healthcare, manufacturing, media, and other spaces that might benefit from implementing blockchain technology for the first time. As the issuers of a “utility token,” called the Divvy, Dispatch is keenly aware that it will ultimately only be as good as the applications that developers build on its platform to solve real-world problems.

Which brings us to the next thing Dispatch is doing right market-wise...

Remember to cast a wide net, including perhaps unlikely prospects. Dispatch CEO Matt McGraw has decreed publicly that he’s tired of the blockchain “scene” – meaning the echo chamber of Bay Area startups and early adopters already active in the blockchain space.

He recently chided his peers, writing: “Stop talking to each other on boats and rooftops. Talk to the boring guy in a suit that could build something on your platform, or to the member of Congress who needs to be educated about Liquid Democracy or instant-runoff voting. Be visionary in your thinking but pragmatic in your approach. You’ll actually get closer to your goals much more quickly. And with less stress.” I'm here to echo, with this series, that teams start their fundraising with value in hand like a validated MVP, over trying to figure out a fundraising hack, what I'd likely describe the 2017 ICO market.

McGraw’s point is perhaps easy to forget at a time when the global cryptocurrency market has grown to over $110 billion. Founders in the blockchain space are rightly proud of that long-term accomplishment (the recent market shakeout notwithstanding). But even at its peak, we should remember the crypto market was still just a fraction the size of the market cap of a single top-five publicly traded company on the stock market.

McGraw and his team, not uniquely but necessarily interpret that big picture in a glass-half-full way. The good news is there’s a lot of room to grow in terms of global blockchain adoption, there are whole industries and government applications that have yet to adopt such technology. And Dispatch is trying to reach as many of them as possible to evaluate real-world applicability of their product differentiation.

If you believe you have a good story on how you're getting fit-for-funding, drop me a note.

Mitchell Posada