2017 will be remembered as the year of Initial Coin Offerings — 235 token sales cumulatively raised $3.7 billion throughout the year. Entrepreneurs of all kinds pushed to succeed in the brave new world of the booming crypto industry. However, many ended up sinking into long to-do lists while trying to not only uncover all potential ICO success factors, but find the time to execute them, as well. How do I know that? Let’s just say that I was there.
There are hundreds of reasons why an ICO can succeed. And a couple hundred more reasons why it can fail. While working within a few different industries to help with token sales, from talent management to AI development, I kept asking myself one question, “How do I pick the ones that really matter and focus on them?” After a thorough examination of the ICO market, I came up with a number of must-haves that all seem to increase a company’s chance at success.
#1. How important is the actual product?
Is the product the main factor of a successful ICO? Well, yes and no. “Yes,” because obviously the product concept is extremely important for a token sale. It needs to be perceived as a crucial puzzle piece in the developing blockchain-based world. However, in 2017 we saw successful ICOs raising countless dollars without having a ready-to-go or even ready-to-crawl product. So, the main question is: in what kind of products are investors most interested in?
Obviously, the first wave that was able to raise millions was formed by the foundational and infrastructural products. For example, Filecoin, a data storage network backed by an application token, which has raised $257M, or EOS with $185M collected. Then there is Bancor and the $153 raised to build networks that allowed users to create liquid smart tokens. Systems like these can be looked at as the building blocks for blockchain technology — it’s the type of stuff that makes quick deployment of decentralized applications possible. It’s what makes large numbers of transactions possible. It enables vertical and horizontal scaling of decentralized applications and these are the types of things early investors are looking for.
The second wave of blockchain startups, which has just started, is all about products which apply blockchain technology to a specific industry. Among the examples are WAX, a decentralized platform for an online video game assets marketplace, which received $68.4M from investors, or Cindicator, a hybrid Intelligence for effective asset management, that has reached a hardcap of $15M in September.
T**ips:** Having a working, tested product before the token sale launches is the best thing you can do. However, raising funds to develop an idea works, as well. In both cases it is important to note that if people do not know anything about your product, there won’t be any hype around it, and no one will invest. Strong communication and community is key in these early days of the token sale.
#2. Strong teams or strong products?
In this evolving world of digital currency, having a strong team can prove to be as beneficial as a working product going into your ICO. Businessmen from other fields who are looking to possibly enter the world of digital investments are researching the ICO battlefield and are in awe — how are these teams able to garner investments with just an idea or prototype?
Team factor is crucial — in a high tech world where a great team has a proven track record of delivering quality tech projects, it makes it much easier to pitch a new project — especially in the developing world of digital assets and tokenization.
What are some of the best ways to evaluate a team?The main criteria I’ve found is:
- Relevant experience
- Involvement with well-known and successful companies
- A solid personal reputation to reassure investors that the project is not a scam
The investment winners of Q4 2017 were able to demonstrate the importance of a proven tracking record. For example, Sirin Labs, created back in 2014 and famous for its secure mobile phones, raised $157.7M for a blockchain phone in 2017. Or Hdac, a blockchain platform dedicated to smart home, was established by a grandson of Ju-Yung Chung, the founder of Hyundai Group, which raised $258M. Another example is Comsa, a project which gathered $95.6M. It is a sister-company of one of the major Japanese crypto exchanges called Zaif, which is aimed to bring existing enterprises on blockchain by providing consultation, blockchain expertise and solutions.
T**ips:** Of course, not all projects are lucky enough to have such famous team members staking their reputations on the new ICO, and some startups may lack high-level professionals. If that is the case, try to search for relevant specialists in the industry and get them on board or invite them to become your advisors. Also, try to avoid any major team shifts during the ICO campaign. It will serve as a red flag and will stop some investors from participating in the crowdsale.
#3. Are great advisors a guaranteed way to bolster the team?
ICOs are a new market and we still don’t know everything. However, the thing you must realize is that there will be gaps in your business, and the most efficient way to fill these gaps is through an advisor that can bring both their expertise and experience.
Some of the benefits an advisor can bring to your team are:
- Getting opinion leaders from the crypto community onboard (one example would be Vitalik Buterin as an advisor of decentralized financial services platform WeTrust)
- Enhancing your blockchain technology knowledge and understanding in what was originally a non-blockchain field (like insurance or finance)
- Allows you to make connections and build partnerships in other geographical markets
- Involves those who have already conducted ICOs or provided services to run a token sale event.
A perfect example of this last point is INS Ecosystem, a service that allows users to buy groceries directly from manufacturers, which raised $41.5M in December 2017. Their advisory board played a pivotal role in this success. It consisted of the consultants from such big names as Bancor, mentioned above, and Civic ($33M raised), a platform offering identity verification and protection tools. Also on the advisory board were members of Blackmoon Crypto ($30M), which focuses on creating and managing legitimate investment funds using blockchain technology.
T**ips:** Not all advisors are equal. First, make sure both you and the potential advisor understand the role they will be filling. Internally clarifying the advisor objectives and what they bring to the table should be at the front of the conversation. You should also define the scope of their involvement, detailing and communicating your expectations. At this same time, try to avoid consultants that have a long list of “advisor” roles, without having a proven track record. Many of them are simply trying to leverage their own portfolio, and they’ll unlikely bring any added value to your project.
#4. How partnerships can help leverage success?
The last, but certainly not least, important factor for building a successful ICO is the ability to win over communities that are a part of other successful blockchain projects. Try to partner with successful ICO runners as there is a good chance that investors who believed in them once will be more prone to believe them again. In November, a decentralized search engine, Bitclave, met the target of $25.5M within 32 seconds after the official sale started. Part of the reason it was able to manage such a successful sale was through their announced partnership with Qtum, (which has raised $15.6M in March). Doing so increased both the average amount raised and the number of investors.
T**ips:** While partnerships in the ICO world are becoming more and more popular, many startups are still avoiding partnering with firms from the same market. Most of them are simply afraid of the competition or do not want to promote any other projects. Only a few realize the potential of the synergy that might blossom from their partnerships.
While there is still no clear roadmap to the success of your potential ICO, there are a few contributing factors that typically lead to a better ICO experience. Having a strong core team is of utmost importance, but it also speaks volumes to partner with others in within your realm to bolster resources and improve relationships within existing crypto communities. Advisors will continue to play a huge role for your vision, but remember, it’s about quality, not quantity. It’s still anyone’s guess to what 2018 will bring, but you can bet every successful ICO will be executing the ideas outlined in this article.
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