The recent growth of cryptocurrency industry has quite improved startups’ access to finance through initial coin offerings (ICOs). This model is an improved alternative to capital or debt funding than other financial institutions because it provides a win-win situation for the startups and their participants.
In the initial 5 months this year, $13.7 billion has been raised through 537 ICOs, according to the global ICO report. The report also shows that the U.S. is remaining to be one of the leading ICO destinations with startups in the country raising $1.09 billion.
However, several concerns are being raised regarding the success rate of ICO projects. Market data released by Coinopsy and Deadcoins shows that over 1000 coins launched through ICOs are now dead. Several interventions must be put in place to address and solve the reducing success rate of ICO projects to sustain investor interest in the industry.
It is commonly known that several ICO projects are failing, may it be in the initial stages or further down the line, showing us the reality that significant changes must be made in order to continually advance the industry. Retaining the interest of potential investors is important, however, taming the failing trend may partially be up to the demonstration of a long-term strategic plan.
Viable Projects are key factors that have to be looked into, if the success of ICO projects is to be guaranteed. Many ICO projects are being launched into the market without being further tested for viability is what makes it a major problem. Why? Because many ICOs particularly token offerings, were missing a commercially viable use case. These are great ideas, but the idea has not been validated by the market, that is why there is no proof of concept.
Travis Stroud, founder and CEO of Lavish Crypto believe that the core product or service and its value proposition to the target customers are also critical to determine the success of any start-up.
He believes that coins are failing because it failed to address the fundamental component of any business, which is a globally saleable product. That one has to get back to the basics of business and must create businesses which revolve to products being usable, simple, elegant, disruptive and most importantly saleable and then over the course of time, incorporate new technologies to make it even better.
Stroud also feels that the investors in the cryptocurrency are contributing in some way, to the sale of ICO ideas that are not viable for business. He said that ICOs devote much of their attention to the technology and fill whitepapers with words to catch crypto community’s attention. In fact, the crypto community itself is demanding it which is also part of the problem.
The Possible Solutions
The possible success rates of ICO projects can be optimally increased by having desirable, transparent and potentially groundbreaking and filtering projects with low viability. A set of regulations might also be of help in filtering out the potentially ‘bad’ projects.
It is true that there is nothing can be done about ICO projects that are no longer functional, but places it is emphasized that there is a need to vet upcoming ICO projects in moving forward to avoid recurrence of this problem.