Important Factors Behind a Successful ICO
Initial Coin Offerings (ICOs) open up a whole new view on fundraising and the role of transparency and decentralization in building a company. They have become the dominant way to fund new crypto projects.
Blockchain has initiated a technological paradigm shift. Its capabilities are opening up a whole new view on fundraising and the role of transparency and decentralization in building a company. Initial Coin Offerings (ICOs) represent this new fundraising mechanism and are the dominant way to fund new crypto projects.
In the first half of 2018 alone, over $12bn was raised by almost 600 ICOs. Despite the popularity of ICOs as both an investment and funding opportunity, there’s still a lot of noise in the space. It’s not easy to identify the right opportunities.
TLDR believe the key factors are simple; concept and team.
From the get-go, concept is king. Does the project have value? Does the tech work?
A key factor of a successful project is that it solves a problem that doesn’t currently have an answer. Evaluating the use case of the potential project to determine value is of high importance. TLDR Partner and Co-Founder, Alex Yamashita, puts this succinctly:
“Does the project actually try and solve for something that is needed? There’s a difference between whether or not the business model makes sense or whether or not it’s required. There’s a lot of things that make sense but aren’t necessarily needed, the needed ones are stronger cases.”
In the fast-moving world of crypto and blockchain, innovation is what will make your project stand out from the crowd. It’s what will get your whitepaper to the top of the pile. Graham Friedman, TLDR Partner, is “very interested in seeing things that reinforce the entire ecosystem. Things that are massively disruptive.”
Potential investors and collaborators receive a lot of whitepapers, so they will naturally gravitate towards projects that generate their interest. The best ICOs are driven by self-awareness, passion, and knowledge - and if the project doesn’t spark interest, the whitepaper is destined for the trash can.
Beyond a good concept, your core team is what can make or break an ICO project. Graham’s quite candid about this:
“After concept, the next step is the team. Are they capable? Have they run businesses before? Is this an existing business moving over? If not, are we looking at extremely smart mathematicians who are coming at us with a brilliant new concept? And that’s one of the biggest parts in my process, the team.”
You need to believe in the team and that they have what it takes to make the project successful. And while previous experience can benefit an ICO, it’s not always an indicator of future success:
A strong team doesn’t necessarily just mean good on paper - they need the determination to make the project a success. Knowledge is important, but if the team lack the drive to push the ICO to success then it will very likely fail.
Alex provides further insight into the process of identifying successful ICOs:
“The first thing I look at when choosing a potential project is the quality of the team. What I mean by quality is not necessarily the CVs or the qualifications, but some of the attributes of those people. Do they have EQ? Do they seem like scrappy people? Are they people who seem like they can get [things] done?”
It’s important that the team behind an ICO are trustworthy, passionate and keen to work towards success. Investing time and money into an ICO should never be a blind leap of faith.
Graham’s keen to outline the complexities involved in identifying successful ICOs. There’s no hard and fast formula for success:
“How does previous success translate to future? I think I’m still out on that. If you’ve gone through this process, you have a little bit of expertise. Maybe the next one is going to be a little smoother. But, we’ve seen some new projects do tremendously well. On the flipside, a lot of traditional businesses tried a reverse ICO, that maybe didn’t necessarily make sense. So, that’s kinda complex.”
An experienced and knowledgeable team is desirable. But it’s not the only factor. The team need to believe in the project and want it to succeed for the value in the project. Not for fame, glory or money. Graham believes that one of the biggest turn-offs to potential collaborators is greed:
“A warning sign is greed. One thing that we heard more than anything when we were at Consensus was ‘we would like you guys to help us with a creative token solution’. Which to me means you have a product with no need for a token. That gets scary. Greed gets scary. Pursuing just the capital. All these things are big turn-offs.”
A fresh concept and a driven and informed team are both attractive prospects when looking into an ICO. But Alex believes this shouldn’t ever be taken as a guarantee of success:
“Everything is timing. There’s no such thing as guaranteed success and I think that ultimately all anybody can really ask for is a chance for success.”
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This article is based on views and information held by TLDR on publication date and may be subject to change, although TLDR does not undertake to update them. Nothing contained herein constitutes investment, legal, tax or other advice, nor a recommendation or solicitation of an offer to buy or sell any securities or to adopt any investment strategy. No representation or warranty, express or implied, is made or given by or on behalf of TLDR as to the accuracy and completeness or fairness of the information contained in this article.