This is the fourth post in a series about IDtech. For more context around IDtech and its importance, catch up on the previous posts listed in order of publication below.
In the last five years, I have seen too many failures of IDtech companies with promising ideas. Either they struggled to launch their product, or failed to drive adoption of their product once in market. However, a handful of others show early signs of promising success.
So I thought I’d document the differences I’ve seen between the fizzles and the sizzles. Spoiler alert: the single biggest predictor of success is simply product execution. It’s the simple stuff like knowing the problem you’re solving, building a good product to solve it, and capturing value with a sustainable business model. Building an IDtech product is hard — the tactics below are ones that I’ve seen used to improve the odds of success for a myriad of IDtech products.
If you’re interested in diving into more tactical insights from successes and failures from IDtech builders themselves, check out our podcast!
Common Product Form Factors
Most successful IDtech companies you’ll find have similarities in terms of the products they’re developing. These similarities tend to bridge technical approaches (e.g. built using web2 vs web3), industries, and use cases.
- End-user app (product for Holder)
Usually, IDtech products are built for people — and those people need a way to manage their identity and consent to data being shared. But some IDtech products target organizations or IoT devices, too (collectively, the “end-user”). This is often called a “Wallet App” or an “ID Wallet”. Decisions about these products, such as whether a mobile app or web app will be developed, depend heavily on the use case.
- Ecosystem tools (product(s) for Issuers/Verifiers)
Creating an ecosystem around the end-user is vital to the success of any IDtech company. After all, an ID wallet is only useful if there is somewhere to use it. Some IDtech companies offer a free end-user product and charge the rest of the ecosystem for the tools to interact with those users, making these ecosystem tools the primary revenue model. We’ve seen various kinds of ecosystem tools successfully generate revenue, such as dashboards, workflow builders, verification landing pages (e.g. for things like OIDC or offline verification), curation & governance services, APIs for integrating solutions into existing systems, and more.
- Industry- or use case-specific integrations
Many successful IDtech companies begin by targeting a specific industry or use case. The more targeted the vertical, the easier it is to integrate with existing systems and get initial users. For example, an IDtech product for Realtors in the USA can build native integrations with state licensing databases, continuing education (CE) programs, and MLS systems alongside the Realtor’s credentials, offering a much more tailored experience than a generic wallet app ever could.
Success Patterns in IDtech
While I don’t claim to have a surefire recipe for IDtech product success, I’ve identified several patterns exhibited by successful companies that I hope will prove useful to others.
Concise, straightforward messaging
Once, I sat down with a venture capitalist to talk about Trinsic (then called Streetcred ID). Midway through the pitch he said, “This sounds like something that could leverage blockchain. Have you looked into that?” to which I responded “Yes, our solution uses a blockchain called Sovrin for anchoring identifiers of issuers.” He looked stunned. “Did you just pitch me a blockchain company without using the word blockchain in the first few minutes?” he asked. Of course, the answer was yes, and Kickstart ended up investing.
Even more so than investors, customers care about how you can solve their problem, not about the technology you’re using. And when conveying this value, it’s important to do it clearly (without buzzwords or jargon) and concisely. This messaging will look differently for each IDtech product, but here’s a framework I’ve found helpful:
“_____ enables ______ to use ______ to _________”
Let’s apply this to a super-successful IDtech company called Classpass. What do they do for consumers? “Classpassenables people to use a single subscription to access exercise classes all over their city”. What do they do for businesses? “Classpass enables gyms to use a simple integration into their existing booking system to earn additional revenue from the classes they’re already doing.” IDtech companies built using decentralized identity don’t need to be more complicated; take ZADA for example, who has tens of thousands of active users in Southeast Asia. “ZADA enables people to use their health credentials to travel seamlessly in a post-covid world.”
Teams that nail the messaging of their IDtech solution tend to see better results and get faster adoption. If you have another framework to explain an IDtech product concisely, let me know!
Decentralized Identity Leads to Great IDtech Products
Despite IDtech products existing for some time, new-age IDtech products inspired by the concept of self-sovereign identity (SSI) are springing up faster than ever to fill gaps that are challenging to fill using the technologies of previous decades.
While I don’t believe SSI is necessary for IDtech, I do think IDtech products built using SSI/web5 technology have a competitive edge. As I explain in a previous post, IDtechs built using interoperable technologies give users more choice and usability of their identity earlier (because of the growth of other IDtechs), creating a virtuous cycle with a higher likelihood of customer satisfaction. Not to mention you get a lot out of the box using an infrastructure platform like Trinsic.
That said, empirically we are seeing proprietary IDtech companies growing much faster than ones based on standardized, interoperable solutions. I think that’s because many of the people building with interoperable solutions are spending far too much time in working group meetings debating governance frameworks or building their own decentralized fairy-tale solution from the ground-up. If SSI stands a chance, the community needs to focus on customers and product.
Focus on Your Core Competency
This advice isn’t new, but it’s easy to forget. A brief reading of any startup or innovation best practice will tell you to focus obsessively on product/market fit, or only do that which makes your “beer taste better”. It’s common sense that 99% of businesses should use AWS instead of buying their own servers, for example. IDtech companies are no different.
Because most IDtech companies face a cold start problem as they’re rolling out their solution, it’s critical that as many resources as possible focus on solving that problem. As teams learn about their market, they inevitably need to iterate on their product. If these iterations require refactoring of infrastructure in addition to application changes, the speed of iteration can slow to a snail’s pace.
Trinsic offers infrastructure for building IDtech products using digital wallets and verifiable credentials. A variety of companies offer infrastructure for identity proofing using government IDs & a selfie. Other companies offer infrastructure for user directories, access management, and login. Savvy teams make wise decisions about the infrastructure they leverage to build their IDtech products upon so they can move fast in solving the most important problems to their business instead of reinventing the wheel.
Business Model Shouldn’t Be on the Back Burner
For most product teams, it goes without saying that great product execution is a key to success. In some industries, the business model is relatively straightforward (e.g., in SaaS productivity software, most companies charge ~$10/user/month). But because IDtech is still emerging as a category, oftentimes the business model is just as make-or-break as the product.
We’ve identified several viable business models for IDtech companies — stay tuned for more on that. For now, remember that business model innovation is as important as technology innovation in the world of IDtech.
Give Your Product a Name
Many IDtech products are given a distinct name to make it more concrete in the eyes of end-users. For example, TravelPass is the name of a product developed by IATA to verify vaccine status of passengers — that’s 10x better than saying “get your digital travel wallet app so you can download your vaccine data” and 100x better than saying “download a self-sovereign agent so you can custody your own verifiable credential containing a cryptographically-signed vaccine attestation.”
Products like MemberPass, MySudo, MedCreds, FarmerID, and many more use their name to solidify their market positioning to end-users and get adoption faster.
Building an IDtech product is hard. Acquiring users and driving adoption is harder. Despite this, my optimism for the future of IDtech has never been stronger. IDtech infrastructure companies like Trinsic are making it easier than ever to build an IDtech company. IDtech companies are getting better at marketing their products. And more IDtech products are getting adopted, leaving behind a blueprint of what it takes to be successful in such a complicated space as identity.
For more tactical insights from IDtech builders, remember to check out the Future of Identity podcast!
We’re all still learning about what makes great IDtech products. If I’ve missed something, or if you’re building an IDtech product and want to chat, I’d love for you to reach out via Twitter and LinkedIn. Follow me and check out Trinsic for more content on IDtech.