With Vitalik Buterin declaring that 90 percent of all ICOs will fail, investors are feeling far from confident. In an unregulated landscape peppered with scam artists, hackers, and evil deeds, it’s no wonder the ICO fundraising mechanism has gotten a bad rap. EY research shows that over 10 percent of all ICO funds have been stolen so far. So, what happens to the legitimate blockchain companies being tarred with the same brush?
Almost half of all ICOs launched last year have already fallen flat on their faces. That’s not necessarily because they were run by scammers who ran off with investor funds. Sadly for many a well-intentioned and passionate team, the investing public is no longer willing to part with their cash so easily. This means that startup teams on the crypto block will have to look beyond crowdfunding and token sales and work harder to convince investors that they’re the real deal.
Connecting to Tangible Assets
This may seem like going against digital currency logic, but with so much uncertainty and the lack of regulation, investors are starting to crave something tangible. ICOs that bind their tokens to real-world assets are starting to see greater success. As investors get wise to the emperor’s new clothes, they’re not happy seeing ICO projects with nothing under the facade. This is why we’re seeing a rise in stablecoins pegged to gold, silver, precious metals, or fiat currency.
Offering Total Transparency
We all know that millennials yearn for transparency and hold corporations accountable for their actions. The same is becoming true of crypto companies. With such bad press coming their way, they have a lot of ground to recover. When whitepapers can be bought online and fancy websites no longer lure investors, the discerning customer is harder to win over.
With 83 percent of this target market trusting peer reviews over any kind of corporate rhetoric, blockchain startups need to build up their social proof. This means having influencers talk about your project, people seeing you online in trustworthy publications, and having social media that engages. Opening up your development process on GitHub is also a great way to win over backers.
ICOs have been blamed for taking investors’ money and giving them nothing back in return, apart from the faint promise of a token price rise. But it doesn’t work that way in the stock market. If you buy shares in a company, you benefit from a price rise and from dividends. This is becoming true for some ICOs, promising investors dividend compensation in fiat currency, or the chance to earn interest on their tokens.
We’re already seeing ICO funding slowing down, and it’s only normal as adjustments have to be made. The crypto startup world is highly volatile and sensitive to external pressures; just one announcement from Google or Twitter can send value sharply down. But that isn’t to say the end is in sight.
What it does mean is that it will take more than a PDF and a flashy website to raise millions of bucks. It’s going to take action, real assets, real code, and real intentions to make it into the successful 10 percent.