Like “the blockchain revolution” that preceded them, initial coin offerings (ICOs) took the world by storm, in 2017.
The storm then continued: A study by Coindesk showed that, in the first three months of 2018, $4.6 billion was raised in ICO sales. That was 85 percent of the money raised for 2017 as a whole.
But, is the gold rush now over? That’s a question that is now filtering through the crypto world; and for unprepared companies — the answer is yes.
It doesn’t matter how amazing your team or product is: If you don’t have the business fundamentals down pat, you won’t get funded. In the world of blockchain, business fundamentals boil down to two things: strong tokenomics and a legitimate business model.
“Tokenomics” refers to the foundational economics of your token. First, among their other qualities, tokens should hold value, be scalable, be able to resist inflationary pressure and offer incentives for their use. Without basic tokenomics, your token will not get funded.
The second half of “tokenomics” refers to a sound business model; every company needs a business model that is logical and scalable. If you can’t explain how your company’s revenue streams work and how those revenues can grow/change over time, smart investors won’t bite.
By studying token projects’ social footprints on Twitter, a research team at Boston College found that only 44.2 percent of these projects were still active by the fifth month of operations. Unfortunately, there are many reasons for this dismal statistic, but one of the greatest contributors is utility.
“Utility” refers to the total satisfaction that is received by customers’ consumption of a good or service. Many products don’t have much utility, and consequently don’t experience high levels of demand. Without a comprehensive understanding of the needs and wants of your target market, you will not get funded. Developing an MVP (minimal viable product) is an effective and efficient way to identify the actual utility of a product. Savvy investors want to see a level of traction; without it, courting them will be difficult.
Brand identity — recognition
We live in a world of multiple options. No matter what you create, there’s a good chance that someone else has created an alternative.
In short, if your customer doesn’t know about your product, he or she won’t buy it. Investors understand this, and they need to see that your company has a strong brand identity. What is the face of your brand; what story is your ICO (initial coin offering) telling? These are foundational questions that can assist you with brand identification. Marketing assets are also critical for a brand, such as logos, visuals, websites and white papers.
Each of these assets will be scrutinized by investors looking into your ICO. Another great way to prove you have brand recognition is through the traction you establish on social media; that is why it’s vital to build strong organic growth and an active community.
Having a product that everyone wants is great, but without a go-to-market strategy, funding is unlikely. A “go-to-market strategy” means you’ve prepared a road map for product dissemination. It answers the question, “How do we get our product into the hands of our customers?”
Savvy investors focus on a combination of objectives and budget. Product dissemination usually requires a combination of marketing tactics, such as PR, content creation and design development. Your objectives and goals should be in alignment with your budget; this is one of the key indicators that your go-to-market strategy is feasible.
Skepticism — jagged investors
Over the past two years, we’ve seen numerous ICOs fail. According to Token Data, 46 percent of the ICOs that occurred in 2017 have since failed. The failure of ill-prepared blockchain companies has created a healthy, but at times over-hyperbolized, level of skepticism among investors.
A reason for this skepticism is due to the comparisons being made between the ICO boom and the dot-com bubble. The similarities are staggering, considering that both events have been based on technology, have involved companies in “over their heads” and have involved an overwhelming amount of speculation. Dealing with perception can be tricky, but remember, the best thing that you can do is be prepared.
This year, 2018, has been a period of retribution for the crypto world; risks have been taken and products have failed; investors lost a lot of money; and regulations surfaced. But that doesn’t mean that the wells have run dry; there is still plenty of capital ready to be invested into promising blockchain companies.
So, before launching any ICO, make sure that you understand why you’re launching it, and more importantly, the value that your token will bring to the world, because the days of the quick crypto-buck are over.