The year 2017 is long gone and ICOs continue to serve as the hot hand for raising funds despite compliance concerns from the SEC. For industry outsiders simply reading headlines and dollar amounts raised by some of these token sales, it may even come across as easy.
Let’s clear that up right now. It’s not. In fact, it’s incredibly difficult. In fact, Fortune recently reported that nearly half of the ICO projects from 2017 are dead.
Below you’ll find 7 reasons your ICO will likely fail and some tips on preventing that from happening.
1. You love your project but it lacks market demand
Don’t get swept up in the ICO hype and dreams of coins being dumped in your lap. Launching an ICO is no different than launching a new product, startup or business. And that generally starts with the product and market demand for it. Adding an ICO, tokens, accepting BTC or ETH doesn’t help you with any of that. No real business model or a lack of market demand means no ICO.
2. Lack of Planning
This is a big one. Just because you have a great website and a whitepaper doesn’t mean you’re anywhere close to being ready to schedule your ICO. The effort it takes is truly under appreciated. Go have a chat with individuals who have managed even successful token sales and listen as they easily list 20 things they would have done differently if they spent more time planning before launching.
3. Lack of Resources
As mentioned above, 2017 is long gone. As is the original model of an ICO. An ICO used to be (for a very short time) a means to fund interesting early-stage projects. Now an ICO resembles an IPO, and you need coffers full of coins to fund it. When you find the money to fund it, don’t forget to grab the following as well:
- A world-class PR firm & a social media army
- Top notch blockchain developers (if you can find a good one that’s available, send them my way please)
- A digital marketing expert, a team is even better
- The best legal advice your tokens, dollars or credit cards can buy
- Several high-quality writers and content producers (add a technical writer in there as well)
- Online advertising manager or firm
- Your banker – for the amount you’re about to spend on paid advertising
- 10-20 blockchain experts to serve as advisors (this is an open scam and everyone knows it, but play along, you have to look good)
Have all of that? Very good, you’ve reached the starting line.
4. Unrealistic Budget Expectations
I honestly don’t know what’s worse, the team that spends every dollar on their product assuming it will sell itself (someone recently told me their ICO marketing plan was to “crank up the viral marketing)…or…. the serial ICO teams out there spending everything in marketing with no product (or even the intent of ever building one.)
To help you with further ICO budgeting, we present to you (free of charge) this lovely ICO pricing guide which we’ve titled “the ICO Budget Guide for Newbies”
As you can see above, an ICO can be expensive. The amount it takes to run a super successful ICO like the ones that generate those headlines is probably enough to fund your average startup for a couple of years.
5. No real use for a token outside of funding purposes
Your project should legitimately require a token. On top of that, you should also have a solid plan for driving mass adaptation of your token. Here is where the item number 1 above comes back to haunt us again. The lack of market demand for your product. No market demand means no mass token adaptation. No mass token adaptation means a drop in token value. Spending the amount of money outlined above to just have a worthless token is not the way to go.
6. Lack of professional content production and social media management
Twitter, Facebook, Telegram, Slack, Discord, Medium, your blog, the forums… all of these platforms are critical for an ICO campaign. And I don’t mean it’s critical to have them. It’s vital to have them humming perfectly with content on a daily basis during the life of your ICO campaign. Which means you need a lot of content.
ICOs are as much about the branding and marketing, as they are about the project and technology.
7. Getting too far ahead before realization sets in
Ever wonder how some of those ICOs raised $50-100m in just a couple of hours? ICO hype aside, it wasn’t by accident. The heavy lifting was done early in the planning stages. A solid product. Surrounding yourself with a solid team of advisors. Snagging smart money early who have their own followers. Creating anticipation and hype. All of this takes time and planning.
If you get too far along in the ICO process before realizing you’ve missed some key steps, it’s likely not going to end well for you.
Before committing yourself to a token sale go back and spend some extra money now on your due diligence. Take a realistic look at your available resources. And by all means speak to someone with real ICO experience to be absolutely certain that a token sale is the best option for you. Most of them will happily give you honest feedback. Just don’t be surprised if they try talking you out of it.
if you’re a small team bootstrapping a product and planning an ICO, your best course of action is to raise a smaller pre-sale round to fund your ICO. This is a smart move for a number of reasons, money aside. It will vet your product, your team, your roadmap and will likely come with a vested advisor who can help you properly plan and execute your ICO plan. And at that stage, you want all the help you can possibly get.