As the ICO has well established itself as a bastardized child of the traditional IPO space, we have seen many similarities between the requirements mandated by a company looking to complete a public listing on a regulated exchange compared to companies looking to raise capital through an ICO and eventually list their token on a cryptocurrency exchange.
One of the similarities between these two spaces is the need for an advisory board or a grouping of tenured, learned individuals who can provide credibility and value to your project.
The main issue — there are many advisors who seem to add the credibility piece, but no true value.
What does this mean?
We see advisors who have their name on 100+ projects each of which span extensive periods of overlapping time. An advisor cannot physically allocate enough hours in a day to provide true value to their clients.
As many advisors in the space are solo-preneurs who work as full-time professionals, it’s very attractive to take on multiple concurrent projects. The issue with this is that it leaves few hours in a day for true contribution or insight into projects. This attitude is unfortunately perpetuated by the space itself which dictates that companies must be hell-bent on accumulating a board of directors which rivals (in size) the actual core team. As an investor, an overtly large advisory board should be more of a red flag then a checkmark in the due diligence box.
How could a startup team effectively hope to pay a 15 person advisory board and expecting them all to properly dedicate 10–20 hours a week to a project.
At the end of the day we run into a chicken-or-egg scenario where as investors who want to add value aren’t getting paid enough to allocate the proper time to a project (to support themselves) and the ICO environment looks for volume (as well as some quality) predominantly opting for a more is better approach.
- We have to change the way we do business, and that starts at the investor level. Investors need to do proper due diligence and ensure that the advisor accomplishes a certain goal or task for the project. If it is not clear as to what they’re doing for the project, ask the right questions.
- It is OK to expect a 3–4 person advisory board if they were all adding value and insight to the project. As an investor, we need to ensure that we recognize that most companies in this space are start-ups with limited budgets and we should understand that.
- By altering the mentality and aligning investors expectations with reality, we can move ourselves away from over the top fanfare and base our investments on the implementation of core business fundamentals as opposed to hyped up teams coupled with overreaching expectations.
- None of these are easy tasks to accomplish by themselves. Wishful thinking dictates that as the industry matures we should see a shift away from antics and a focus on the core model of the projects who choose to crowdfund in this space.
Circling back, it is up to the companies to hold their advisors accountable for the value they promise. Let’s pay our key advisors what they’re worth so they can focus on a small handful of projects at a time. Posting a face on a website does nothing but proliferate this attitude — degrading the quality of the ICO and cryptocurrency space. Company by company, ICO by ICO, we can change this. Let’s start now.