If you own or are considering launching a business, you’ve likely heard about cryptocurrency and the Initial Coin Offering (ICO) market. Also often referred to as a token offering, ICOs as method of crowdfunding has swept the 2017 spotlight, and it’s with little wonder why.
Startups (including those that may not even have a live or working product) have raised as much as $232 million dollars in ICO tokens. A number that, depending on the volatility of the Ethereum (ETH) and Bitcoin (BTC) market, often crosses the $400 million dollar mark.
This type of potential has seen a flood of new ideas from startups from around the world, as entrepreneurs are seeking out what many believe to be “easy money.”
But all is not what it may seem; thus far, it is estimated that 46 percent of ICOs from 2017 have already failed. And this number will certainly rise.
Here’s what you, as a business owner, founder or even potential investor, need to know about the other 54 percent.
Focus on the long term
It’s good to keep in mind that the ICO market is, in its purest form, a crowdsourced method to raise capital for tech startups. Those startups that do well focus on long term success, while building and releasing platforms, programs and applications that grow.
The 54 percent of ICOs that will make it through 2018 will follow this trajectory. No, not all of them will “make it.” But those that do will maintain their focus and continually release updates showing progress, platform traction and growth in incremental or exponential stages.
Should you want to invest in one (or become one such startup yourself), you’ll want to remain focused on the long-term, while delivering incremental success in the short-term.
When looking for these ICOs, the timeless adage “the proof is in the pudding” comes to mind, bringing us to the next point.
Top ICOs, like top companies, have great data
The sweeping rise of investment in ICOs has shown both founders and investors that market sentiment often outweighs good ol’ fashion data.
No one wants to be the person who “missed the next Bitcoin” and in doing so missed the fortune of a lifetime. Thus, founders and investors alike get caught up in the romance of an idea, neglecting to determine, quantify, establish and focus on the data. The cold, hard numbers and KPIs (Key Performance Indicators) that show how well, and where, the business is going.
Should you consider a token offering as a means of raising capital for your own business, or should you seek to invest in “the opportunity of a lifetime,” remember that of the top ICOs of the remaining 54 percent, those that survive 2018 will almost certainly have great data to verify and quantify success.
Looking for growth rates, adoption rates, transaction numbers, LTV (Lifetime Value) of customers, installation rates, code release time and more can all be used to paint a clear picture of the business you’re creating or looking to invest in.
Raising capital is hard
Unfortunately, stories that promote and highlight the “ease” of raising capital (such as Brave raising $30 million dollars in 30 seconds) create a distorted view of just how difficult it can be to convince investors to part with their money.
As someone who consults on and executes the raising of capital for blockchain-based companies, I can confidently say that most overlook the difficulty that truly exists.
From building communities, creating content, executing PR, consulting with legal teams, and of course, having the technical expertise to create a blockchain-based business, the resources needed are tremendous.
From spending multiple months of time creating engaged communities, to spending 10s, 100s and in some cases, millions of dollars to raise capital, it is not an undertaking to be underestimated.
This is exactly why, should you be looking to invest in one, you’ll want to identify companies that have allocated a majority of their resources to development of the product, rather than those who allocate the majority of their time to promotion.
Additionally, should you be looking to launch one, you’ll want to ensure that you have the resources, including time, labor and capital, to execute it correctly.
There is a bright future
The blockchain space is, in the grand scheme of things, a very young and early market. Raising capital for blockchain companies via an ICO is an even smaller one. Both will continue to grow and develop, establishing a very robust ecosystem.
However, it is still very early on in the process. Keeping the points above in mind, you should be able to add insight to your choices, and have a clearer understanding of what it takes to succeed as both an investor or founder in this market.