Making or marketing? Sure signs of a winning ICO
by Cahill Puil, managing director, Byte Media Group
Unless you've been hiding under a rock, you've probably seen the cryptocurrency market slide — the steady, downward slide that creates market panic and causes many retail investors to shake in their boots.
Since reaching all-time highs at the end of 2017, the cryptocurrency market has dropped by more than 50 percent — all in the space of a few short months.
Add to this the recent news that out of the initial coin offerings launched in 2017, 46 percent have already failed, and you have an abundance of data pointing to further downward trends.
With the market at best trading sideways, or at worst, in a slide, here's what you need to know about the other 54 percent of ICOs that are still holding on.
Only the beginning
(If you were hoping that my initial discussion point would be rosy, you might want to skip this part.)
So, 46 percent of all ICOs in 2017 have failed. But — brace yourself — this is just the start. In the midst of all the market hype around cryptocurrency, many investors neglected to remember that the ICO market is, in many ways, a glorified tech startup market.
And as for tech startups — upward of 90 percent of them fail within their first 5 years.
In the past few years, good, bad, and ugly tech ideas have been thrust into the spotlight simply because they boast an underlying foundation of blockchain technology.
Apply the tech startup failure rate to the blockchain world, and the ICO failure rate is almost certain to increase from here on out. And reassessing initial investments will definitely be part of a solid strategy for weathering the storm.
Of the 54 percent of ICOs that make it in 2018, most will have delivered — or started to — applicable technology and engaged users on working systems.
Simple promises of faster X, more distributed Y, or more secure Z will represent less and less of the market moving forward. The proof, as they say, will be in the pudding.
Identifying the blockchain companies that are on target for code, platform, or infrastructure release is going to be critical. Further, finding platforms with working models of their application, and developers that have working businesses, active partnerships, and platforms that are live will go a long way toward improving your odds of selecting winners in the 2018 market.
The best are making, not marketing
If marketing were the main thing that mattered in the blockchain world, then companies like Bitconnect would be huge. Wait. Never mind. We already know how that ended up.
If the examples of the failed 46 percent give us even the remote ability to see the future of the remaining 54 percent, they'll show us that the top companies in the blockchain space are those that spend their time making, not just marketing.
Like them or not, bitcoin, Ethereum and others have spent years building products. Tens of thousands of development hours have gone into refining the underlying technology.
Of the remaining 54 percent of ICOs, the ones that will push forward and see success — even if they don't have live products or users at this point — will spend an increasing amount of time building product.
Making, not marketing, is how they'll stay on target for code, platform, or infrastructure releases.
Valuation means nothing
Unless you're thinking about selling at this very moment, valuation means nothing.
As Chamath Palihapitiya said regarding the startup world, "Why would you want your company valued at billions of dollars? I want it valued at $0 before we are liquid."
One must temper this viewpoint, given the nature of an ICO world in which liquidity via tokens happens almost immediately. However Palihapitiya's point still holds a tremendous amount of validity.
An ICO whose valuation starts high — with no product, no users, no development, no proof of concept — is usually a serious problem.
It takes time to build a product. It takes time to build a business. Given lower valuations, startups typically take a more sober approach to development, applying resources to core aspects of the concept that will push the business forward.
Additionally, lower valuations typically mean more upside for everyone — founders, developers, the market … and you as an investor.
The long view
With 2018 off to a rocky start, it's fair to say that successful ICOs among the remaining 54 percent will be those that their head down and focus on the work that will make their ideas a reality and give their products weighted traction.
As Warren Buffet has said, "In the short term, the market is a popularity contest. In the long run, it's a weighing machine."
The trick is to zero in on those few ICOs in the 54 percent that share this view.
Cahill Puil, is managing director of Byte Media Group (bytemediagroup.com), a company whose mission is to help blockchains, ICOs and tech companies go beyond beta.