Build the tech before you figure out the business? Bad idea
This week, I was reading about The Computer Scientist Who’s Boosting Privacy on the Internet. Featured in the story is Nym Technologies: a startup aiming to create a new Internet (no, not that new Internet) that will be secure and promote privacy and anonymity.
It’s one of those stories that makes you ask a serious question: why would anyone build technology for such a specific use case and - in my opinion - with such limited money-making potential?
I’m getting ahead of myself. Let’s not criticize Nym just yet (That will come).
For the sake of argument, let's say that a high level of security, privacy and anonymity is something which people care about. Let’s take that one step further: they care so much about it, they are willing to pay for it. (These are assumptions that are not always borne out by reality, but let’s stick with them for now.)
Unless you are a computer nerd, the maximum you currently do is running systems updates on your computers, tablets and phones. And you do that because you get this nagging message 'Update Now'. Sometimes you are forced to do that because the equipment or software maker disables the systemand you have to buy a new one.
Some might install a VPN device, use an anonymous email address or start using cryptocurrencies to stay under the radar. But, the moment you use WiFI at your local Starbucks and pay with your phone, this disqualifies you from any conversation in which people care about security and anonymity.
Our security posture is improving by better systems provided by large organizations. Update to Google improved login process or Microsoft security patch affects billion's people at once.
Now it is time to look at what Nym is actually doing.
In order to achieve their aim of building a more secure, private and anonymous Internet, they are building the following pieces:
Nym Wallet to keep earned NYM tokens, which can be used for staking and delegating
Nym Client
Nym Gateway
Nym Mixnode
Nym SOCKS5 Client
Nym Requester
Just listing individual components of this project and reading the associated documentation gives you the sense that this is a very sizeable technological project. It is clearly run by very smart people, with years of development ahead ... and no clear path to making money.
This is a research project, not a business startup.
Why do I say this? There are a few big challenges facing this project.
Whether we’re talking about bitcoin, Ether or other forms of wealth, its value is still described in dollars or other fiat currency. Government regulators are not open to allowing this new form of investment to enter the financial markets. As well, anonymity is not part of the equation that will help this startup achieve its other stated goals. Quite the opposite.
We don’t have to reinvent the Internet to achieve better security. Secure communication can be achieved by combining a few mature technologies like Tor, PGP, DNS over HTTPS and VPN.
But even if Nym’s ideas seemed to have real potential, the biggest challenge in achieving them is not to build the technology. It is to get the users to adopt it and then turn them into paying customers.
What should be the alternative?
Build a compelling story and validate that consumers and businesses are willing to pay for better privacy and anonymity. That’s how you demonstrate that you can build any business model around that.
Next, build a simple prototype with off-the-shelf technologies.
So how are they going to make money? Selling ads? That business model doesn’t work if all of your users are anonymous. As well, building an anonymous marketplace has been tried, too. Ask Ross Ulbricht from Silk Roadhow it worked for him. To prove this business model, they’ll have to get paying customers.
As noble and forward-looking this project is, it will end up, at best, as a part of some other technology stack. Even the most ambitious project will have to eventually make money and that's the recurrent pattern.