ICO is shooting yourself in the foot if you want to build a successful company
To become rich it’s actually great.
ICO’s — the way they are structured today are a terrible direction for your company. If you really want to build a company, if you really want to build a product and have people use it, then ICO to raise funds is a bad decision. If your goal is to become rich, however, ICOs are great, go for it.
It sounds counter intuitive as ICO-ing solve one of the biggest problems for startups — money. But there’s always a trade off, you are bringing in a whole set of different problems, yourself being insta-rich is one of them.
I lived in China for 3 years and long story short started a Bitcoin group which is now one of the largest Crypto communities in China. When I came back to Israel I got approached by a lot of companies planning to ICO, asking for help regarding China — advisory, connections, whales, investors, shills etc.
The craze of the biggest financial change in history has brought with it a lot of entrepreneurs and dreamers, myself included. It also brought echo chambers and confirmation biases as to what can be done ‘on the blockchain’, what does it mean to start a company, and what the sight of raising 40 million dollars can do to people (There were very few good projects that actually did make sense).
*I’m not a ‘maximalist’, I think there are quite a few things that require and will be better when they decentralized, trust-less, and censorship-resistant. Money is the first use case, but this for another post.
I hear a lot of nonsense from smart, ambitious, and hardworking guys at the head of ICO startups. I heard a lot of great ideas that could have succeeded if they went down the normal path. Here are 3 of the problems, which are often overlooked, of ICO startups on the way to success
- Product/Market fit
The first fundamental issue with ICOs is that they are skipping the most important building block of a startup — Product/Market fit, the moment where whatever you built actually makes sense to people wanting to use it.
Whatever decentralized product you are going to build, who is going to use it? who wants decentralized Uber or a decentralized file storage? How are you going to make changes with feedback? Is each iteration going to need consensus? Hard forks? ICO roadmaps skip to the top of the pyramid right to the ‘Growth’ stage, before they even have a product or someone wanting they use it. And no, investment in your token is not validation in the use case of your product, it’s pure speculation.
Steve jobs might be one of the few people who managed to get to product market fit without any users, but it’s Steve Jobs, and while there are people like him out there, I bet zero of them have done/are planning to ICO.
Without product market fit you will build the best product that no one cares about and no one will use. Pets.com anyone?
2. The Startup Grind.
Starting a company is not easy, getting users, getting traction, building something that works is long and depressing. What happens when the “Hard days” come? When no one is using your product, nothing is working, and it seems like you’re going nowhere. If this situation continues you might not be able to pay your employees, maybe fire a few until you get some traction.
Oh wait no, you’re already a millionaire. Why the fuck are you working so hard, trying to get people to use it? Who cares, you already made it.
As soon as it will become difficult you will just leave, you need the grind, you need to be incentivized to keep going.
3. Whatever you want to do doesn’t actually make sense on ‘the blockchain’.
These are the things I usually hear.
- “We are building a new economy”
- “Bitcoin is too volatile”
- “Decentralization of X or Y market.”
It makes absolutely no sense to initiate your coin and offer it to the public for any of these (except for raising money).
Read Michael flaxman’s ICO’s are cancer. If you don’t need a trustless, censorship-resistant database, you don’t need a blockchain. Even if your product made sense to be decentralized, as long as you are in the picture it’s not. Why don’t you just build the product and ignore the blockchain. Once you have users, once you have something working you can see if it makes sense. Test it, do it in a centralized way as it would be anyway, without the blockchain, if it works, propose and migrate your product.
I haven’t even talked about managing token prices, exchanges, ‘market markers’. Reddit and telegram trolls, ransom FUD, and a huge community of angry investors who are not happy their investment dropped by 50%, by now it’s 95%.
Oh and this is great
Within one year or two, maybe a little longer, if you have any dignity you will publicly say one of these statements: “We tried”, “ it was a lot harder than we thought”, “the world is not ready yet for this technology”, or “We could not anticipate the problems with building using blockchain technology”. If you’re a coward which in all honestly is more likely — you will disappear with other people’s money.
I wish all the luck to the ICO startups who actually want to build companies and change the world, and I’m sure that a few would work. But my opinion is that they created more problems for themselves than they think. If what you really want is to build a company and becoming rich is secondary stay away from ICOs, instead build a product, find product-market fit, get users, and then maybe you can raise money from them.
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Thank you,
Eylon
