From the gold rush days of 2017 to the more subdued releases of 2018, everyone and their mother-in-law are enthusiastic about ICO’s. A lot of the bumper growth in Bitcoin and other cryptocurrencies have fueled the growth of the ICO’s and the massive amounts of funding which has been pushed into these ICO’s. There are statements out there from intelligent folks that 99% of all ICO’s will fail and Forbes just released an article about 50% of Bitcoin fueled ICO’s from 2017 have collapsed .
We not sure of these numbers but as the entire industry is like the wild wild west its very hard to attribute realistic numbers as the answer are always in the grey rather than black or white.
But we are not going to debate the numbers we are more looking at some of the ICO projects we have worked with or advised and what we see as the top 5 reasons. Our background as a startup founders will also come into play here as we will contrast and compare between how a Venture Capital backed startup would react vis-a-vis how a ICO backed company is behaving.
A lot of the ICO’s went in with a view of viral growth of their community in a short span of time to get maximum bang for their token sales. Which was a good ploy cos you wanted to be a mile wide and inch deep as you are looking for maximum exposure.
This was fine for the token sale but when the token sale is done you still need to get back to basic marketing practices to make sure communication is happening. A lot of ICO’s faltered and continue to falter at this step. You have to keep the core of the community engaged to make sure there is interest in your product development phase. If you were a regular Venture Capital backed startup here is where the Board would step in and ask that marketing and communication are not given a step motherly treatment over product development.
As we all know a cost sheets discussed during startup funding is as good as pulling numbers of thin air. But there are a cost sheets with details of budgets and allocations and most angels and Venture Capitalist’s will ask to revisit that occasionally to see how things are deviating. This doesn’t make the data right but this makes the founders responsible for conducting the process and mostly getting chewed up every monthly or quarterly reviews.
ICO’s have even less rigor around pulling numbers for allocation of cost and budget post-ICO’s and really no oversight from the Board members who are usually part of 6–9 ICO’s. Well and after doing product development for 5–6 months is when everyone realizes they were way off and then there is no going back and then begins the slow death spiral of reducing product scope or phasing of product releases.
One of the main reasons for ICO’s failing has to do with the real world application of what will be coming out of the ICO product development phase. Some of the assumptions made on real world use of the product are sketchy at best and most of it hilarious if not for the serious amount of money which has been raised. Also Most ICO’s today are selling tokens solely for the purpose of raising money rather than actually making a fundamental shift of underlying solution due to use of blockchain technology
There is the other threat of whether you are issuing a Utility token or you are actually securities and as the SEC has done in the recent days it will come after ICO’s blatantly flouting the rules of offering securities. This has pushed some of the ICO’s to only go for private sale and accredited investors but I am not sure even there the rigor is not as strict as what a startup would face if they had approached the same problem with a non-ICO or a non-Blockchain based solution. A rising tide is lifting all boats but high tide is always followed by low tide.
As most folks who have run companies realize that over and beyond the product development and marketing work there is also a real company which is being run. This includes planning, strategy work, operations, legal, HR and all the non-exciting parts. In a startup which has investor money mostly these functions are considered important enough as the company maturity needs to preserved at appropriate levels to encourage next round of funding.
A lot of ICO’s have forgotten the basics of these simple blocking and tackling work which has resulted in the organizations having a skewed maturity within the various important areas. In ICO’s even simple things like Website updates, explainer videos, PR, conference attendance information are all hardly available. Also, when the budget allocations come to bite all these non-exciting parts gets further pushed under the rug resulting in organization who can’t seem to get it all together. If you look at most of the teams of the ICO’s there are very few folks who can run and organize these areas.
Most ICO’s do have a very simple road-map slide on their website or in the initial documentation which showcases token sale dates, pre-ICO sale dates, post-ICO dates. This is all fine and dandy which is what the investors are looking for.
Very few of them have details on post product launch, customer acquisition milestones and scalable growth milestones. These are all considered as problems to be solved which can be solved once the ICO money bar is met. This skews towards a short term thinking within the founding team and doesn’t augur well towards and ROI or long-term vision based thinking.
The bottom-line is other than for the real world application issue as discussed above most of the other issues can be handled easily as long as these ICO’s look at themselves as startups who are in it for the long run (7+ years) and not a quick get rich scheme.
DSHG Sonic is new age consulting agency helping startups and ICO’s create and execute a coherent strategy across product, sales and marketing. We help companies in the role of part time COO to help founders concentrate on core product but still making sure the company is operating smoothly. Please get in touch with us at firstname.lastname@example.org if you have any questions. You can find more about us at www.dshgsonic.com
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