Anatomy of a strong ICO

When I saw the tweet from @CryptoCobain, I was shocked that in such a public forum, anyone would be so bold to literally copy a white paper. But one of the comments made to CryptoCobain’s tweet had my jaw hit the ground at warp speed… “I don’t care, I’m here to make money.”

Let history show, as listed on ICO Bench, DADI raked in $28,750,000 and SONM $42,000,000. Money was indeed made, which I’m not against. I too hope to raise a significant amount of money. But it’s about purpose and value.

I promise this article is not going to be preachy and, of course, all sorts of corrupt shenanigans happen in the corporate world. But what I see in the ICO world is suspending all business realities — which sooner or later will come crashing in. Hello, Internet circa 1993–1996!

First and foremost is the principle that your reputation can’t be reclaimed. Once it’s destroyed, you can’t get it back. However, in ICO land, you can pretty much do what you like — so long as the marketing is slick and the pumpers and dumpers can hump away on an exchange like a 12-month-old Labrador.

We all know that the run will end. There will be carnage for those who came in a bit too late and held on for a bit too long, like pigs to the slaughter.

What is a strong ICO?

That depends on your intention and mindset. For many, it is the pump and dump, a systemised way to use funds to make a lot of money really fast. For others, it’s about upholding integrity for the blockchain community, which tends to take a strong liking to technology based projects. A small, but hopefully growing section, is looking for commercially viable projects, where the ICO is the beginning of something awesome.

I firmly belong in the latter category. For me a business needs to serve a purpose and deliver value. But I have also seen the folly of ‘In tech we trust’. Because a great idea does not mean a great business.

For me a strong ICO covers the following:

• Token supply allocation: An ICO is the beginning, so why are so many ICOs using the vast majority of their token supply for the token sale event? This tells me they will lack future scale, future community and a future in general. What happens when the funds are all spent? A strong ICO has enough to raise needed funds, but has tokens on hand for the good of the community they need to build, which gives the token utilisation/relevance.
• Token utility: Aside from owning the token and being able to sell it, what else? A strong ICO builds a community with those owning the tokens participating in the community. This is the real power because, as part of the community, you can and should influence the value and growth of your token.
• Business model: How will the enterprise be commercially viable? How will future revenue streams come in and what are they? It’s rare to see these sources addressed. It seems that most revenue comes from the token being sold in an ‘eco-system.’ But that is just plain poor economics.
• A competitive and differentiated position: The act of starting, growing and scaling a business is very difficult — the failure rates are horrific. This is where I get rather pissy with the ‘In tech we trust’ crowd. Fact: the best technology or coolest idea hardly ever wins. A competitive business model, strategy and differentiated position craps all over a ‘great product.’ Otherwise we would have a very different world. To have a truly strong ICO, you must have a strong vision about how your product or service is going to be competitive. Period.
• Do not rely on risky B2B relationships or step on the toes of giants: When you examine the hyped ICOs that will “take down Facebook, replace global media and redefine banking,” ask yourself, how realistic? Yes, I do know that giants fall, but rarely is it because of one entity. It takes a concerted movement to be truly disruptive and survive the inevitable attacks by the incumbent. Just on this point alone, I figure 80% of ICOs will burn because they run out of funding and get squashed.

Of course, overall, the normal elements of any business need to be there: a great team, governance, capability and a burning hunger for success.

It’s great to have self-appointed cops on the beat such as @CryptoCobain. Because it’s just plain wrong that the cut&paste functions on a keyboard can generate such wealth.

(Sorry, couldn’t help that one preachy bit.)