3 Major Mistakes which cause ICOs to fail
Not all ICOs are scams.
There are some very interesting blockchain projects.
The Initial Coin offering is first crucial milestone of a blockchain start up as this will allow them to raise the capital to fund the company and the project for the next few years.
ICOs may last anywhere from a few days to a few months.
I am going to explain why the crowdfundraising event specifically fails rather than company itself.
Softcap vs Hardcap
The minimum they have to raise to fund the project is the softcap.
The softcap is the basic minimum to carry out the project.
However, most ICOs aim to reach the hardcap which includes an additional budget for contingency plan.
Because ICOs are usually hosted in countries where cryptocurrencies are not regulated, it is important to choose ICOs is to remember that the start up is under NO LEGAL obligation to refund the money to the investors.
So it is important to spot the red flags before jumping in:
1.Too complicated product
If a project is too complicated or the problem or the problem ‘it solves’ is too complicated, even if the project is a game-changer, it might not have a market to to be sold to once it is ready.
Though innovation is very important, products that are too complex are likely to have a hard time to get investors.
2. Lack of Business Managers
Most blockchain startups are founded by software engineers.
However, there are more in and outs to managing a business and money.
Especially one which won’t be making profits for the next 2-3 years.
If investors notice that the team does not have strong enough players, they are likely not to invest in the ICO.
3.Lack of hype
Hype can be defined as the excitement around a project.
The more the hype, the more popular discussion the project is likely to be.
This is essential to get investors interested in the project as well as give the event momentum.
Hype also allows for the project to reach a wider audience as well as a maximum investors.
The Initial Coin Offering is just the beginning of the start-up’s journey.
The next step is delivering what they promised in their whitepapers.
With so many companies running ICOs, the competition to attract the investor’s attention has become more cut throat than ever.
The odds of a start-up surviving the first 2 years
Let me know if this info was helpful for you 😉
Founder of Satoshi Library
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Disclaimer: I am not a financial advisor and the information provided does not replace professional advice. Cryptocurrency prices are highly volatile as well as evolving very quickly. This post may contain inaccuracies, so please do your own research before placing money in any website. Thanks!