ICOs and Flaming Parachutes
A few years ago, I was involved in a pretty cool video project. The project consisted of a skydiver jumping out of a plane and then after a period of free fall he deploys his chute. Just a normal everyday skydive, right? Or so it seems until his parachute suddenly goes up in a ball of flames and the skydiver plummets towards the ground. Several long seconds later he cuts away the remains of the crispy parachute and deploys a second chute which he uses to descend safely to the ground. The current blockchain industry and ICO frenzy reminds me of that project.
“The idea of ‘Let’s do an ICO and figure out our business model later’ is prevalent… and dangerous.”
An Industry that is Moving at Terminal Velocity
Just like the skydiver in the video the world of blockchain is moving at terminal velocity and everyone is trying to get noticed and grab a piece of the billions of dollars being thrown at ICOs. There’s one problem though… not everyone jumping out of the plane, should be. A lot of companies have latched on to blockchain with the idea that it’s easy money. The idea of “Let’s do an ICO and figure out our business model later” is prevalent… and dangerous.
What do you need to have a successful ICO?
To pull off a successful ICO, just like the flaming parachute project, you need a few things in place to succeed. You need a strong team, a tight plan, a real product, and a market that cares. If you lack any of these items, there’s a good chance that you will go down in flames and no secondary chute is going to keep you from bouncing off the deck.
To start things off you need a rock solid team covering multiple disciplines. At the top, you need a leadership team that has a clear vision of what they are trying to accomplish and understands their own strengths and weaknesses. From there a team needs to be built covering several specializations such as legal, development, UX/UI, and marketing. To pull off a successful ICO and product launch with a 2 or 3-person jack of all trades team is next to impossible. If you were the skydiver in the video project, would you want the person packing your chute to also be the videographer and the pilot?
Have a Roadmap
Before you hit the road to promote your ICO you need to have a clear roadmap on how you intend to bring your product to life. You need to be able to justify the amount you are trying to raise plus put in place a realistic timeline to achieve your post-ICO objectives. Once your development plan is locked down you can then start building your ICO.
“The money you spend today for the right lawyer to help guide you through the process will be significantly less than what you will have to pay if you unknowingly cross any legal lines.”
If you don’t have a lawyer in place at this point, stop everything.
From this point on everything you do can leave you vulnerable to regulatory bodies. Go spend the money and bring in legal expertise focused on security law. One of the reasons that the SEC has gone after so many ICOs recently is that teams have failed to properly plan and as such black and white rules are being regularly and flagrantly violated. The money you spend today for the right lawyer to help guide you through the process will be significantly less than what you will have to pay if you unknowingly cross any legal lines. Spend the money to make sure that your parachute is packed properly.
Take it to Market
Now that you have your product path and legal to-do list all sorted, you can begin putting together your marketing strategy and road show. You thought covering your legal buttocks was expensive? There’s some large pools of money out there looking for the right ICO and this is where you need to light your chute on fire to get their attention. Bring on the content team, add a PR firm with blockchain experience plus the right connections, and don’t forget the events team to support your international roadshow. Your CEO will now have a large enough entourage to justify having her own theme song when she walks into events.
The Elephant in the Room
Does your product really need blockchain? If so, how much? Michael Harris, Data Scientist at ABL, recently wrote a great article on this topic: Contains 5% Real Blockchain. There’s a number of companies out there developing products using blockchain just so that they can justify going the ICO route to fund their project. Many of their projects can, and should be, fully developed off-chain and the blockchain community will quickly, and often publicly, point this out. This just might happen while you are on stage in an ICO Pitch contest. You need to choose the right tool for the job. Even though it may work for Mary Poppins, if our skydiver jumped out of the plane with an umbrella instead of a parachute, he’s probably not going to get the results he’s looking for.
Is there Validation?
Finally, will anyone care about your product? You are trying to raise $100 million to fund development but will the product really provide enough value to the target market to justify such a valuation? Take the time and spend a few more dollars and do your market research.
The blockchain world is full of half-baked ideas but when you attend events like Crypto SXSW you see that there really are a lot of teams and projects out there that are solid and extremely compelling. There is nothing wrong with jumping out of the plane and lighting your chute on fire, just make sure that you have checked all the necessary boxes to ensure that your ICO has a safe landing.