Why is the ICO Failure rate at 92% ?

in #ico2 years ago (edited)

Initial Coin Offerings (ICO) - Technology Fund Raising for 'Currency' based Tech.

This relatively new 'crowdfund' to generate funds for Technology based businesses, in particular Blockchain powered applications, has become quite 'the thing' in the past few years. Their failure rate post the hype of the Funding of 92% is a terrifying prospect for investors.

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The first ICO was in 2013 by Mastercoin, successfully raising funds and beginning the era of Initial Currency (Coin) Offerings. The system creates a Token / coin on which a value is attached. This value is then raised through various 'crowdfunding' activities.

Why are So Many Failing to create a successful Business when there's So Much Money invested?

At a failure rate of 92% this is a very high risk - high reward investment.
But why are so many failing? With so much money how could they possibly fail?

Examples of Funds Raised:
Ethereum :: $2.3 Million 2014
Brave :: $35 Million 2017
Kik's :: $100 Million 2017

This is merely the tip of the proverbial ICO Iceberg where in 2017 ICO's raised 40 times what they'd raised in 2016, with reportedly $6 billion raised via ICOs in 2017. 2018 is set to see even more money being tossed into the Coin well.
That's a ton of cash splashing around...

According to my research, by February 2018 approximately 46% of the 2017 ICOs had failed.

There seems to be no finite answer as to Why so many ICOs are failing. It's obvious the Hype that's created is not supported by successful business models, giving the ICO industry a sticky name for being a very high risk, scam infested arena.
Which is a shame as it's really an innovative way in which ground breaking technologies can raise capital. Giving the average person opportunity to invest in these technologies, which we'd not had access to before. High Reward technology investment has always only been available to the High End investors, leaving the 'little folk' out of the money making arena.

ICO's changed that.

ICO's Structure

The ICO's are hyped up by communities which are built by gathering the techie's and crypto believers together in various 'techie' online channels for example: Telegram ; Reddit ; Github and then the more open social channels of Twitter and Facebook.

These community members are generally known as 'Hunters' as they seek out and promote various ICO's for the 'Bounty' (Tokens they receive as reward for their time in spreading the message of the project) or Airdrops which are large sums of Tokens 'dropped' to participating community members who will generally be the first to join the community and begin 'Hyping' the project to encourage others to join the community.
This community building is the mainstay of the pre- ICO funding. Creating hype and interest to increase the number of investors and the amount raised.
The community are given tasks during a Bounty run to activate further market share across social and business networks to enhance the visibility and increase community member numbers.

The ICO's are rated by certain metrics with one of the ratings being the number of Telegram members. Needless to say that this is not necessarily a valid metric to use to measure the potential success of a business and, in my opinion, is rather short sighted.

The community members are usually extremely dedicated, spending much of their time promoting and chatting about their beloved ICO to whomever wants to listen. This, as a marketing tactic is inexpensive and effective in rounding up lots of support for the project.
How effective is this in creating a solid business or reaching the end user?

Why so much failure?

An Idea is not a Business.

A Swish Website doesn't guarantee a successful business

A loaded Advisory Board doesn't create a solid business

A Hyped Telegram community doesn't reach the end user/ consumer

Followers are not Buyers of the product

Bounty and Airdrop Hunters are not your customers

ICO Failure boils down to 2 Things: Business Plan & Marketing Strategy

These two are fundamental factors in gaining funding in any other arena. There are only very few Investors who invest in an idea alone. There are even fewer businesses that will see success with an idea alone, regardless of how weighted the Advisory board is.

I've spent a large part of the past 2 years investigating various technologies and their uses in society. Looking at ways in which we can harness the emerging technologies to uplift the millions without basic living conditions. Sounds crazy, I know. Food First. Absolutely, but we can in fact create the food and then create businesses to support that food growing to ensure a circular, sustainable solution to poverty.

In those 2 years I've seen many of the ICO's come and go. Many with very flimsy ideas raising serious capital, some of whom were scamsters from the start and some were just inadequately prepared for the real world of business.

The one common factor, in my opinion of their failure, is a lack of Marketing Strategy and sufficient planning to reach the end user / consumer at the start of the project.

A cleverly crafted & executed marketing strategy is vital in any business.
Why so then do the ICO's miss this very very important part of the journey?
Why are folk investing in a 'business' with zero marketing strategy?
Many don't even have anyone in Marketing within their team!

"Ground breaking. Life Changing. One of a Kind."

Who cares if nobody will ever know about it?

Marketing Strategy is A Must for Every business. ICO's are not excluded.

For any business to succeed there must be a strong, solid marketing strategy composed of every part of the business model from pre ICO through to reaching the consumer who will be purchasing/using the product.

Marketing advisory seems to be a large hole in the ICO industry where most ICO's haven't even considered it important enough to mention in the whitepaper.

ICO Success, Business Success depends on how many consumers you have purchasing your product. Without Marketing there is no way for your ideal clients to know about your product.

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"Bonnie Crofford - Experienced Global Digital Marketing Strategist designing strategic opportunities to grow your brand, develop the story and design a foundation of online Footprints."

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#Blockchain #CryptoCurrency #ICO #DigitalMarketing #StrategicMarketing #Branding #Business

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Simple reason its mostly shitcoins with no viable market, no new tech, and its being used as a funding tool to raise money for businesses that do not have the scale they promice.

Absolutely agree with you. The 'idea' doesn't always translate to a viable, usable product. And yet... there are still so many coming into the marketplace. Hopefully as we all become more 'savvy' we'll stop financing these idiotic ideas that will never see the light of day.

100% with you what also bothers me about ICO's is theres no liablity so you invest you lose your money oh sorry. If i'm a shareholder in a technical sense i'd like to recoup something like A selling off the assets or IP to someone else once the fund liquidates. Also key individuals in the ICO should be liable for loss of funds to a certain extent.

ICO's are being seen as donations or crowdfunding but its more like a capital drive and with the money raised from these ICOs' there needs to be some responsiblity for funds and outcome good or bad. I really like the concept of an ILP which i did a review on here

Could be the start of a self regulating ICO

My voting power isn't where it needs to be to give you an upvote but I enjoyed this post and great comment so i sent you a little SBD :) as a reward! Keep up the good work

Thank You!! I deeply, Deeply appreciate it and will certainly repay the favor soon. It's very important that we amplify the issues within the system to ensure that we create a stable, focused arena for folk to feel safe investing their money.
Taking responsibility for the funds invested is definitely something the Advisors and team should be accountable for.
Many Advisors are sitting on multiple ICO's , I'm sure receiving lots of Moola for their 'Name' but definitely are not taking any responsibility when things go 'square' after the Funding is complete.

If I could, I would have donated more. It's nice to find really well put together pieces and I like the way you think and lay out your arguments and with all the rubbish being posted on steemit if I do find a post I feel is worth it I'd gladly reward it

I fully agree with your sentiments ICOs are really the wild west and anything goes and money is being thrown into this sector like crazy which im fine with as long as it lands in the right hands and creates valuable products that can generate future income and become a sustainable part of the digital and world economy

Thank You so much for supporting my efforts. I'm so thrilled that you enjoy my work. I love writing my thoughts and experiences of the industry.
Looking forward to many more conversations and getting to know how we can help one another to be more successful. What is your expertise? How can I assist you in achieving your goals?

Let's hope so and hopefully rope more people in a long the way :)

Likewise, if you are on discord or telegram i'm keen to have a chat. I'm in digital marketing, primarily SEO but i have interests in a range of tech from AI, blockchain and always looking to learn more. How about you?

Oh I LIVE on Linkedin. Am quite active on telegram, discord, reddit, twitter, instagram, slack...
Be great to chat. Find me on Linkedin - Bonnie Crofford.