CEO IAC Evgeny Schelkonogov about problems and changes of the ICO Market

Innovative models for corporation management and development suggest the basic principle of perfection — to keep up with the times. The tertiary industry improves its tools constantly, which allows our company to provide its services on a whole new level. I am talking specifically about our implementation of blockchain and the creation of our own cryptocurrency — it was inevitable if we are to keep up with the times.

2017 was a great year for the ICO market. What happened during that year? In 12 months, 382 projects went looking to be crowdfunded. The ICO boom has let us thoroughly analyze the market and point out the main issues with the teams looking to get their projects funded:

• Incompetent teams

The team is the most important thing to any ICO. Each member has to be a professional at what they do in order for the project to be successful. It is also important to understand, that the team consists not only of developers and thought leaders; there are also law experts, economists and many others. A well-executed PR campaign is also very important; the marketing team has to do their best.

• Inability to understand the peculiarities of the business and the market

All ICO projects are bound to the same market, yet they are quite different, and each one requires a unique approach in order to be successful. One of the market’s specifics is that it changes its direction constantly: what yesterday was enough to satisfy the needs of both investors and consumers tomorrow might be insufficient. The market is oversaturated with all kinds of projects, and new businesses are having a hard time trying to fit in and find the investors. It is important to closely follow all the new tendencies in the fintech and IT industries; introducing such tendencies is even better.

• Lack of proper legal analysis

ICO requires investments, and due diligence is necessary. Legalizing campaigns in order to create a safe environment for investors is one of the main issues that often comes up in this field. The issue is particularly severe in certain countries.

• Lack of professional investors

Cryptocurrency investing requires a certain knowledge degree in this sector. Nowadays investors often purchase tokens at a discount and sell them as soon as said tokens hit the exchanges. Such speculations lead to a decrease in the token’s price, which in turn dooms the project to failure. ICOs basically rely on random investors or are forced to execute a long roadshow.

• Insufficient support after the ICO

It is important to note one thing: we’re talking about real projects, not scam ICOs. A successful ICO is only half the work; the next goal is to implement everything indicated in the Roadmap, give life to the product, so to speak, the product which has attracted investors and without whom the hard cap would never be reached.

• Incorrect project price estimation

2017 showed us peculiar ICO crowdsourcing dynamics: no matter how high you set your hard cap, you will be able to fund the project and investors will be able to profit off selling their tokens once it appears on the exchange. As a result of this, many teams can’t correctly assess the amount of funds needed for the project. They look up to the average, or even to the maximum estimate that is common for the market. What happens now to such projects? The more responsible of them create funds and become investors themselves.

All of these issues has resulted in a large number of unsuccessful ICOs by the end of 2017, that were not able to raise their hard cap and introduce their token to exchanges. In addition, if in the beginning of the year only 50% of the projects were able to succeed, by the end of 2017 only 20% could make it. Also, more than 80% of the projects had started their ICOs without having a finished product, some of them — without even a prototype. Investors invested blindly into shady ideas. The teams behind said ideas often turned out to be inexperienced, and a lot of the projects were simply a scam.

When an ICO is being carried not only by a good team of experts, but by an established, growing business, it is important to measure risks. Many years’ experience is an irreplaceable asset in this case. We see new possibilities in front of us: more investments, growth, scaling and the new technologies. We believe that after the ICO our business gets to experience a second birth thanks to the new possibilities that come into reach. The ICO allows a business to acquire new investors, get valuable advice from advisors and generally grow. A certain downside is that many legal relationships of the company are unregulated, as well as the amount of resources required. A company with a developed prototype or even a product (for example, a fully functioning platform) requires a certain amount of funding. Running an ICO as an established business is only possible if the business is very successful.

The company’s leadership had to solve many issues after starting the ICO: maintaining business reputation, restructuring the company, various management problems. Many of the projects in 2017 have done a good job at defacing the ICO market. For a business, running an ICO leads to the risk of discrediting itself and losing customers. In addition, in a company that maintains stable growth it is important to modify the accustomed internal and external structures. Managing a business with an ICO is quite different from managing a business in the real sector.

What awaits the ICO market in 2018? Changes, as obvious as it may sound. The time of the “casual investor” is gone, and projects will seek established funds and big investors. Only professional teams with enough experience will be able to fund their projects, and hard caps will get more realistic. The ICO hype will continue to decline due to the increased difficulty of funding and increasing legal regulation. ICO, blockchain and cryptocurrencies will become popular business tools for many large corporations.

Even though it is still too early to make final conclusions, one thing is for certain: there are many challenges ahead of me and my company.

Evgeny Schelkonogov, CEO International Auto Club Corporation (IAC)