Last year (2017) was undoubtedly a booming year for for the crypto world, where a plethora of people began to step their foot into this emerging industry, proposing grand goals and ICO (Initial Coin Offering) projects that could or would potentially ‘change the way the world turned.’ Yet, with the year having passed and 2018’s Q1 slowly coming to a close, taking a look at Bitcoin.com’s survey of last year’s ICOs show just how risky this nascent sector may actually be.
“…of 902 [ICOs] tracked by TokenData, 142 failed before raising funding, and another 276 failed after fundraising.”
Source image: https://www.tokendata.io
While 418 failures out of 902 tracked projects may seem like quite a lot already (46% failure rate), this is without including those ICO projects that may have not been concretely determined as ‘failed’ due to falling off the radar, disappearing into nothingness, or simply having nothing to show. It is sad to see such numbers of a nearly 60% failure rate of ICO projects (if you include the aforementioned projects where statuses are up in the air) since it continues to feed into the single-shaded association that ICOs are nothing more than scams.
Although these statistics may scare off many, it does not mean that all ICO projects are bound to fail. Like any business, most have a hard time making it past the 3 year mark, so there is bound to be risk whichever route is taken. And so, for those thinking of venturing off into creating a startup through an ICO, it’s worth considering just what separates successful projects from failed ones.
The Need for an Advisor
Since the advent of the crypto industry, there have been many that have been trying to get involved in various ICO projects in one way or another. Whether it’s out of the hope to make a quick buck, or to advance their professional careers in an emerging industry, an Advisor is one role that is becoming highly necessary for adding value to ICO projects. But, with a myriad of suspicious players in this field, knowing whether you have chosen the right person that will do the job effectively is a question all project managers need to think about before embarking on their startup journey.
Role of an Advisor
A truly effective Advisor is one that can add unprecedented and unique value through the offering of his/her connections with investors or decision making people. This person should have access to the above-mentioned individuals where trust is held in both directions, since their role will be mediating between the two parties (the company vs investors) and advising them to ultimately invest. Moreover, any Advisor that has connections to key players in other areas (law, technology, marketing, media, etc.) would undoubtedly be useful, since they could help advise a mutual partnership that helps benefit both the ICO-related company he/she is working for and those potential partners.
Beyond those suggested duties, any Advisor that expresses interest in engaging in the project itself could add further value through everyday involvement and advice on the more menial tasks at hand. In other words, any company that has an Advisor that is willing to be part of the growth on both a macro and micro scale will have more of a backbone than one that does not.
The Right People
One thing that a few successfully growing ICO projects (such as Neufund, a blockchain based equity fundraising platform) have demonstrated is that building a strong community of partners, advisors or contributors can be more effective in adding value to a mutually held goal. In the case of Neufund, they possess a community of highly diverse, skilled individuals from various backgrounds, from Founder of Ocean Trent and advisor for the Estonian E-residency program to a Crypto expert and VC, previously at Early Bird VC .
Sometimes, simply knowing the right people – whether few or large – can make the biggest difference in where your startup goes, especially if those Advisors are well-respected and reputable in their industries. Gnosis, the decentralized prediction platform on Ethereum, serves to be a great example, where the company shattered records and surprised the world by selling out for $12.5 million USD within a mere 12 minutes. It was said that two of their Advisors were members of Ethereum.
Setting Yourself Up For Failure
While having an Advisory Board may seem like you are one step closer to establishing a successful ICO, this is far from the case. Simply having Advisors does not guarantee success. That’s like saying that having a business idea and the drive to make it happen will lead to profitable outcomes. Unfortunately, that’s not the way the world works – if it was, a great deal more of us would be living lavishly in the fruits of our dreams.
ICO projects like ARK or Inchain are two primary examples of failed cases that we may all be able to learn something from. The former project ARK initially offered to provide services to use non-native tokens to potentially rewrite what the altcoin was. It was a proposed idea that appeared to be quite a ‘game-changer,’ and yet, they were only able to raise about 132 BTCs, with no real proof-of-concept provided. This is believed to have been due to the lack of diversity and sense of debate between the Advisors, as most of the people on the Advisory Board were co-founders and developers, resulting in a lack of new ideas being shared because the group was rather tight-knit and close.
With Inchain – an insurance based investment platform – there was a similar issue with a lack of proof-of-concept and stable management. As listed on their whitepaper, one of their Advisors was a founder at an investment solutions provider, while the other was the head of finance in an insurance firm. Simply having these two alone as Advisors did not bring enough support or knowledge to manage the ICO project. To have a truly strong, sufficient team, an ICO project should have specialists that can provide their two cents on the technical side of things. Without that, you could be looking to fail.
Building the Right Advisory Board
The companies mentioned above are just a few of many failed cases that went into creating something without the proper knowledge, support, or tools to get it done right. Knowing what the right requirements are for building a great Advisory Board is one of the first steps any entrepreneur might want to take when starting something new, especially in this emerging industry.
When searching for a skilled Advisor, it is absolutely necessary to do your research. While that may sound obvious, many failed ICO projects are proof that this fundamental step might be loosely taken. Before going anywhere, you should make sure to Google said Advisor, examine their LinkedIn pages, see their track record as Advisors for current or previous ICOs, and whether they work in reputable consultancy groups. Secondly, one thing you might want to take away from the Inchain case, is asking the question of whether your Advisors fit well together and can add value in various ways. A team with only technical expertise won’t do well when it comes to the business side, and vice versa. Lastly, make sure that your Advisors are actually there because they care about the product and project at large. Whether its for the financial gains or because they truly believe in the value the product may bring, merely having an Advisor for the sake of making the project seem more credible is a project waiting to crumble when things get tough.
In the end, while there are a plethora of ICO projects failing, just like any other venture you choose to go into there are also success stories that give hope that it can be done. Building something great takes more than just an idea, it requires a strong group of people from various technical, financial, and even creative backgrounds that can each add value to help make a project become successful. Yet, at the heart of it all, building the right Advisory Board is what can often separate the projects that go somewhere from those that go nowhere. Great Advisors are more than just those who lend their two cents, they are guides, overseeing and mapping out the ideas, ultimately guiding the ship in a direction towards the right investors and partners that could help everything sail forward successfully.
If you’re interested in starting an ICO, or building a digital community to help grow your startup, consider contacting us at: email@example.com.
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- Nearly Half of 2017’s Cryptocurrency ‘ICO’ Projects Have Already Died
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- How Important are Advisors to ICOs?