What do you do when you seemingly raise c.£20m-£30m over-night?
You now have a significant war chest at your disposal to build your vision and shake the foundations of whatever industry you are looking to disrupt.
We have all read the stories about the dizzying figures that some are raising for their fledgling startups, with little more than an idea.
But research from TokenData and Bitcoin.com shows that out of 902 crypto ICO’s launched in 2017, 142 failed before actually raising funds and another 276 followed them post ‘successful’ completion of their fundraising. That’s a 46% failure rate. Add in the 113 who are MIA with dwindling communities and social media presence and that lifts the failure rate to 58%.
There is not a one-size-fits-all diagnosis. I personally feel that the hype surrounding this space outweighs (for now) the capacity for these businesses to deliver on their visions. The demand to invest in these startups relative to what most are currently capable of delivering, with existing technology and infrastructure, is disproportionate.
But it also comes down to having or not having a solid commercial model that solves a real-world problem. From my observations, many of the ICO’s of 2017 failed to think and act like a business from the outset – and this may explain why once the funds were raised in their token sale, there was an unclear roadmap of what they had to do next.
Identifying if your idea is a viable business comes first. Do people need this? Is this solving a problem? Then asking, is this a distributed problem that needs a distributed solution, ie do we actually need to use a blockchain and build a token for this? Then look to the why you exist, what you will do, and how you will do it when building out your proposition. Can it be built and are you the team to do it? Prove it, build a prototype.
“From my observations, many of the ICO’s of 2017 failed to think and act like a business from the outset”
Will 2018 be different? I think so. We are seeing and speaking with businesses – existing and new – who want to do things right, from the very start. To build lasting businesses that just happen to leverage blockchain technologies. There is a clear plan for how much money they need to kick-off their projects in order to develop their applications and build out the business. Also regulation is coming, and with it they know that adoption of best practice and compliance now, will allow them to thrive in whatever framework will exist within their jurisdiction.
The market is also maturing. Retail investors, from what I have seen, are becoming more savvy and are demanding more from the projects they are looking to invest in. There is more choice for them, more noise to filter through and the calibre of many of these new projects is increasingly strong.
So for those starting out and looking to raise funds in an ICO, you should consider the business model & strategy first. Be conscious of what value you are going to create and be honest, do you need a token to deliver this value? Create a clear plan to execute and build what you set out to achieve.
Do not see an ICO as the end goal, it is just the start.
Jonathan Millett, Founder of block3: email@example.com