Meeting Investors’ Expectations: What’s Up With ICO?

Even good startups with deep technical background are raising from 5 to 15% of their targets. What’s happening with ICOs?

Photo: cassie / Flickr

Photo: cassie / Flickr

Not that long ago, new projects were raising millions of dollars from the blockchain community. Inspired by the success of their predecessors, many startup founders around the world were anxious to make their own initial coin offering (ICO). But the situation quickly changed: even carefully considered projects are often raising only 5-15% of their targets. What’s happening with ICOs? What are investors waiting for?

Last summer, in the midst of an ICO gold rush, blockchain projects were doing just fine. It seemed that all you had to do was to post an announcement and then simply wait for the cash to begin flowing. Most investors didn’t even bother to read the “white papers,” preferring instead to throw money at pretty much anyone looking to enter the market.

Many startups inspired by the success of their predecessors, jumped straight into their own ICOs. However, this autumn it seems that the blockchain community has gotten cold feet. News about failed campaigns and unmet expectations are coming from everywhere: even sustainable projects led by founders with solid business backgrounds are failing to meet their targets.

Of course, recent ICO hoaxes have seriously vexed crypto currency enthusiasts. One such example is the controversy surrounding the Tezos blockchain project. In October investors filed a lawsuit in California against the group. Tezos had raised a record $232 million, but the founders violated U.S. securities law through the token sale. The group is accused of false advertising, unfair competition and even “inventing” ICO advisors.

Investors are expecting to see the results

However, frauds and other scams are not the only reasons why many ICO campaigns are failing. According to blockchain experts, investors are eager to see the results of the first large scale ICOs.

“Some projects that have promised great things will have to present their results in early 2018,” said Alexander Shevtsov, founder of Jury.Online, a platform for making tech-related deals. “If their results aren’t satisfactory, this could undermine confidence in an ICO. In this case you’ll have to wait for the wave of disbelief to settle down.”

It’s also simply more difficult to attract the attention of big investors because of the competition: new projects appear every day and the number of ICOs this year has already exceeded 1,000.

“Almost 80% of investment comes from major players, such as funds and business angels,” said Anton Sarychev, business development director at ICOadm.in, a firm that helps startups raise capital. “Some good startups fail because they run an ICO in a hurry trying to catch the gold rush.”

Aggressive marketing is still effective

According to Sarychev, a lack of marketing is one of the major reasons why startups fail. After all, it’s impossible to sell a product nobody has ever heard of. Other reasons that thwart success include questionable prospects for the project, weak teams and a glutton of similar projects already on the market. The ICO is not dead but implementing a successful campaign could take more time and effort going forward.

“The market today is perfect for an ICO,” Mikhail Mashchenko, an analyst at eToro, the social network for investors, told CoinSpeaker. “I have no doubt that it will be much harder to raise funds. Literally every day new countries decide to regulate or ban tokens. An ICO on ‘legal’ platforms could help to raise enough money but it certainly will take much more time.”

Aggressive marketing is still effective and can help in promoting any idea, even the most ambitious ones. Placing a photo of Ethereum founder Vitalik Buterin next to a logo of an unknown startup can determine the success of an ICO campaign now, despite the fact that the “gold rush” is almost over. The challenge will be to meet investors’ expectations later. Overall, a thoughtful and consistent approach is still what creates the best future for a project.

Victoria Zavyalova

Victoria Zavyalova is a U.S.-based media consultant. Previously, she worked as a journalist for various international publications in Russia and the UK. From 2011 –2013, Victoria was responsible for the Russian Startup Rating. Recently she started exploring blockchain technology and investing in crypto currencies. In 2017 she was involved as an advisor in several ICOs, including one by the New York-based Starta Accelerator. In addition to her professional interests, Victoria loves jazz, modern art, coffee, yoga and raccoons.

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