Startups Urgently Need to Adapt to a Changing Market as Token Sales Drop 90 Percent
With a bear market and a change in sentiment around ICOs, the risk of using such a fundraising mechanism now constitutes a cheaper, more reliable way of hosting a crowdsale. A staggering collapse this year in ICO funding – from $2.5 billion in February to $181 million by September – means that it has become vital for startups to actively reduce their risk and costs.
This means trimming the fat where possible. An equitable way of achieving this is through one of the emerging ICO platforms wherein a token sale can be launched inexpensively in a matter of days.
While still a valuable way to raise funds, and potentially a lot if the project gains traction, it no longer reliably attracts the level of funding needed to justify a bespoke platform built from scratch. Essentially, startups can no longer throw money at contractors to build their ICO platform; they must explore cheaper options to help balance the books.
The dizzy heights of what in retrospect looks like a crypto bubble, with Bitcoin grabbing international headlines for stopping just short of $20,000, appear to have gone. No commentator can say with complete confidence where the ceiling is, but this much is clear: speculation and fervor in cryptocurrency markets have seen a dramatic slowdown in recent times.
Startups need to be asking retail investors for their pocket change and not promising get-rich-quick schemes with x1000 growth, which Ethereum co-founder Vitalik Buterin aptly suggests is now highly unlikely at best.
“The next step will be getting people who are already interested in cryptocurrencies to be involved in a more in-depth way,” Buterin said. “Go from just people being interested to real applications of real economic activity.”
Removing overinvestment into ICO launches is the smart money move right now. Larger projects who enjoy extensive media coverage and wider publicity may be the exception, but no smaller startup should be hedging their bets on developing a crowdsale platform in these conditions.
In fact, many companies have already moved to use token sale solutions. There are a host of options already on the market, so here are just a couple.
LexICO, an offshoot to LEXIT (LXT) – an online marketplace for the buying and selling of assets, intellectual property, and whole or parts of companies – is a full solution for launching ICOs, airdrop and bounty campaigns. It offers significant discounts for those who pay using the native platform token and aims to help startups customize their token sale and organize all KYC requirements.
An alternative solution exists in Das33 that aims to create a strongly structured process for ICOs whereby the platform retains control. It has a few interesting features; for example, when participants pledge funds to a project they receive a ‘premium token’ in exchange which yields rewards after targets are met.
Das33 certainly try to address recent bearish sentiment around ICOs by emphasizing the level of oversight it will have on applying projects. However, crypto-heads can tend towards skepticism over one entity holding all of the keys which could affect how many users are attracted to the platform.
The summer of 2018 will be remembered for failing to provide many startups with funding from token sales. Markets change, and few faster than in crypto, so as we enter into the next phase it is vital that fundraising tactics are adapted to current conditions. This strategy will begin with companies learning to launch more efficient ICOs.
Featured Image: DepositPhotos/ realinemedia