Why most ICO projects will fail
Good day EVERYONE. This is CryptoPortfolio project and my name is DAN. Today I would like to give you my 5 cents on why the majority of blockchain projects, which collected or will collect money through ICO campaigns, will fail. In my humble opinion, the cryptocurrency market is crazy, the money is thrown into the projects which will never generate any income. So I had to step in and save your money from vanishing with my great presentation I am about to show. By the way, I put the logos of those projects on the slide not because I think they will fail, but because I wanted to get your attention. I hope everything is clear, let’s begin.
If you are a subscriber of my telegram channel, you already know what is on this slide. But for those people that are not a part of the VIP club, here are the main reasons a lot of projects fail.
Business statistics. And do not underestimate the power of statistics, it is like essential market data you need before accessing the market.
Blockchain-associated reasons. As you know, price for your bitcoins and ethers are important to you, it is not less important for blockchain-based projects to have enough money to exist and create the main product.
STARTUPs-associated reasons. I think you saw that 9 out of 10 startups fail. I think this data is right, but only when we talk about Silicon Valley, not small business.
The first and most important reason is statistics. Do you know how many small businesses survive in US after 5 years?
Or how many IT businesses survive after four years? BTW, this data can be applied to ICO boom but you should multiply the failure rate by 6 or 7.
First of all, only half of new small companies make it after 5 years of existence.
82% of failed companies experienced cash flow problems before closing.
27% of new companies tried getting more funds but failed.
At the moment, in the United States only 40% of small business is profitable, 60% is either break even or losing money.
IT startups, the business segment we are very interested in, have only 37% chance to survive after 4 years since inception.
Here is the opinion of why business fails from companies that failed. 46% failed because of incompetence, 30% — lack of experience, 13% — fraud and other reasons, 11% — lack of experience in providing goods and services.
I found a great source of information about why startups fail, and I am sure you will find something interesting here for yourself.
This graph illustrates 10 most popular reasons startups failed. And I can absolutely assure you that all of those reasons can and should be applied to blockchain projects. Especially, 6 first reasons are of greatest importance for blockchain projects. They cause the majority of failures on the cryptocurrency market.
So, most of projects fail due to insufficient or non-existent demand for their product. And , I beg you, check this flag first before even looking at the project you want to invest long-term! It is vital that there is actual demand for the product. There must be a market where you can sell, and that’s why blockchain is so risky, there is little-to-no market here.
Cash burnout. Here I just want to mention how much ICONOMI team spends on its project per quarter. Are you ready? More than $500 000… That’s what we can all call cash burn.
Competition! Remember I told you in my video about scams that competition is important. Here it is, the fourth most popular failure reason, most companies getting outcompeted on the market. Just take a look how many new similar ICOs there are on the cryptocurrency scene.
I really want to reach out to new projects’ teams that want to start collecting money from crazy investors. Please, check if your project can survive just 2 years. Do not pay yourself crazy $1 mln a year. Focus on the product you want to deliver and try to plan costs beforehand.
Blockchain-related risks are very important. This is the platform where the new decentralized applications are being built.
Many projects collect money in cryptocurrency, and the depreciation of cryptocurrency can hit the project pretty hard. At the same time, many projects now sell a lot of cryptocurrencies for fiat almost immediately after ICO. By doing that, they protect themselves from price fluctuations and having fiat on their hands, they can actually plan long-term.
At the moment, there are a lot of “stupid” money on the cryptocurrency market. Due to this, maybe we observe the market bubble. We already have 3 times bigger capitalization than during the last market peak. Thus bubble burst can hit all projects pretty hard by destroying their funds’ value.
Finally, many projects are built on platforms such as Ethereum or Waves. Nobody is insured against complete blockchain failure that cannot be repaired. That’s the risk you always have to take into account, because blockchain is absolutely new technology and some platforms are very complex. Maybe even too complex.
Tomorrow is going to be a video review of Aragon, do not miss it! Thanks for watching, like and subscribe. Bye, until the next time.