Bitcoin has died 102 times. This is the (mock) statistics provided by Bitcoin Obituaries. Similarly to bitcoin, numerous blockchain startups see their obituaries after only a year or two.

Unlike the cryptocurrency, however, reports of bitcoin startups’ deaths are rarely an exaggeration, and even if they are resurrected, it is almost invariably via acquisition and change of ownership. Such was the case, for instance, of the bitcoin platform Harborly, which announced in April 2016 its purchase by American Estate & Trust. Alongside the acquisition, Harborly also announced in the blog post that now they are “the first Bitcoin platform that will be tapping into the $4 Trillion IRA world by handling bitcoin transactions for IRA accounts.” 

According to Statistic Brain Research Institute, 25% of all startups fail in their first year, 36% in the second and 44% in the third. Only 58% of finance/insurance and real estate enterprises survive to see the fourth year of their operations. Among the four principal causes of startup failure, Statistic Brain lists, in the order of importance, incompetence, unbalanced experience or lack of managerial experience whatsoever, lack of experiences in the line of goods or services, as well as neglect, fraud and disaster.

Multiple testimonies both from within and outside the bitcoin industry confirm this picture. For instance, Dave Sloan, reporting on the closure of visual configurator platform Treehouse Logic in 2013, remarked:

Startups fail when they are not solving a market problem.

Web Engineer Thomas Parisot, former CTO of now closed digital marketing startup Dijiwan, tried to pin down the cause of the enterprise failure with a warning:

A good product idea and a strong technical team are not a guarantee of a sustainable business.

Currently a Googler, founder emeritus of 4chan and the founder and CEO of DrawQuest Christopher Poole announced the closure of his remix artist community Canvas two years ago and concluded:    

It may seem surprising that a seemingly successful product could fail, but it happens all the time.

More recently, when community-powered fraud prevention cryptocurrency platform shut down in November 2015, the co-founder of VC funded media company B5Media and founder of news site The Inquisitr Duncan Riley noted:

While the service looked good on paper as an idea, it’s clear that there wasn’t a market for it; you could either argue that it was an idea before its time or simply a platform trying to provide a service when there was never going to be much demand, given it went against the grain of Bitcoin as an anonymous payment service.

Why do bitcoin startups fail?

While bitcoin as a currency is intrinsically linked with value and its transfer and exchange, industry startups never declare profit as their final objective. What they pursue is rather innovation, disruption and enabling those users whose circumstances are restrictive, e.g. unbanked population or migrant workers sending funds back to their families. Despite that, investment and eventually a revenue and further investment are crucial in a startup’s lifecycle. Equally important as the profit, however, is the startup’s reputation and here the way bitcoin is viewed by investors plays a crucial role. As Terence Lee put it in June 2015, the catastrophic failure of the former king of the Bitcoin world Mt. Gox “reinforced the perception that the industry is run by shady characters who couldn’t be trusted. On the bright side, it signalled the end of a phase for Bitcoin, from a get-rich scheme into an era that will hopefully be marked by true innovation.”

Writing in the beginning of May 2016, Yuliya Chernova expressed a different view claiming that “most people continue using bitcoin for speculative purposes and not for commerce” and since “the bitcoin movement, encouraged by venture-capital investors, has so far failed to kick off a consumer cryptocurrency revolution,” startups cannot gain currency with consumers.

“The idea,” Chernova writes, “in many cases was that once you build the infrastructure – that is, create the digital wallets and bitcoin-to-fiat-currency exchanges, and put “Buy with Bitcoin” buttons on checkout pages – consumers would jump in. They would want the benefit of privacy and lower chances of identity fraud while merchants would be protected from chargebacks and credit card fees.” However, it rarely works like that. Moreover, it seems that with the consolidation of the bitcoin market, it is becoming increasingly harder for startups to establish themselves for the long run. Or, in Daniel Palmer’s words:

After what you might call a 'Wild West' period (when it seemed everyone with the urge was setting up their own bitcoin-based service), the space is now rapidly becoming more dominated by bigger, more professional outfits, often with serious funding to get them off to a solid start. And while some big bitcoin names made the news this year for positive reasons, some firms had to report that they were closing down.

The same idea was reiterated most recently by Managing Director & CEO of J.C. Flowers & Co. J. Christopher Flowers. Flowers, whose current net worth is $1.02 billion according to Forbes, expressed his views as he spoke at the SuperReturn International 2016 (22-27 February 2016) held in Berlin. According to Flowers, the most of the fintech startups can hardly look at a bright future. One of the risks they are facing is taking poor lending decisions. According to Flower’s prediction, while some of fintech startups will be very successful, the rest will fail.

A number of bitcoin and blockchain startups that did not live to see the present day could well back Flowers’ opinion. Among them, for our case study, are 37coins, Brawker and Buttercoin.


The bitcoin remittances startup announced its closure on 11 August 2015, a year and a half after the launch of its service SMS Wallet, with which users could send bitcoins via SMS to anywhere in the world. Like with many other bitcoin startups, the main premise behind 37coins' mission was to profit from servicing the unbanked world population. As reasons for their closure, 37coins quoted the failure “to deliver a quality product that showed product-market fit” and their experience that “SMS delivery between different carriers in countries outside the USA is unreliable.”

The beginning, however, was rather promising. Founded by Songyi Lee, Johann Barbie and Jonathan Zobro, 37coins received $525k in two rounds of seed funding in 2014. In May of the same year, the 37coins’ team spent three weeks travelling in the Philippines in order to research bitcoin-related opportunities. They met with members of the bitcoin exchange and visited payment provider and bitcoin exchange to discuss possible partnerships. According to the company’s blog post, the visit and the information gathered gave them confidence about introducing their product to the Philippine market space. Importantly, the experience taught the team to offer their service not only to the unbanked but also to travellers who visit locations with no internet connection or ATMs. A month later, 37coins made a pitch at the Plug and Play Tech Center’s Media & Mobile EXPO in Sunnyvale, CA. In September 2014, the team expanded with three new members, only to announce its disbandment a year later.

So, where are they today? Former CEO and CTO Johann Barbie currently works as a CTO at blockchain company Ambisafe, which is developing a cryptocurrency wallet software. In February 2016, Ambisafe was selected as one of the vendors to develop a blockchain-based government elections solution for Ukraine.

37coins’ co-founder Songyi Lee and bitcoin consultant Konstantin Korenkov continue as freelancers while the former Senior Architect Andres Junge is currently a Senior Architect and dApp Developer at blockchain app production studio Consensus Systems. On 1 May 2016, the latter announced, together with BlockApps, a virtual hackathon (1 June–15 July 2016) as a part of the 2016 Visual Studio Marketplace Hackfest.


Similarly to 37coins, 18 months after its launch Brawker, the proxy buying platform whose purpose was to facilitate bitcoin users “to buy anything on the web with their bitcoins,” in April 2015 announced the end of their operation. The step was justified as follows:

…Our growth rate did not meet our expectations, and the service does not scale as we would have expected to. The Bitcoin community came up with many great startups and the environment is very different from what it was 18 months ago, when we started working on this project.

Brawker’s announcement closely followed their previous notice from March 2015, in which they informed about a change in the company’s management (namely, the exit of CEO Cyril Houri, leaving the platform with a team of two developers running all services), as well as the migration to a new server infrastructure.


The open source digital trading engine Buttercoin founded in 2013 by Cedric Dahl and Bennett Hoffman also closed in April 2015. Having received $1.6 mln in two rounds of funding, in 2013 Buttercoin was nominated among the top 8 startups picked by TechCrunch from Y Combinator’s Summer ’13 Demo Day. Buttercoin was targeting the remittances market and was backed by a number of influential investors, such as Google Ventures’ Kevin Rose and Chris Hutchins, Reddit founder Alexis Ohanian, Floodgate, Initialized Capital and Rothenberg Ventures, among others. Nevertheless, as pointed out by Jon Russell, “despite those influential backers, it looks like investors are less keen to be involved in bitcoin. Beyond the valuation of the cryptocurrency, … the bitcoin exchange market has found relative maturity. The rise of Coinbase, Bitpay and a handful of others — which have sucked up millions from investors and won big clients — makes the chances of a smaller player breaking through less likely. Even when that player is backed by reputed people and institutions. Might this be the first of many casualties from the consolidation of bitcoin?”

Russell’s question is yet to be answered.


Diana Bogdan