After The Raise
Exploring the success of tokens post-ICO
It is no secret that an ICO challenges the conventional structure of venture capitalism in a number of different ways. However, one of the key differentiating factors between the two is the type of audience that actually participates in the funding process. While venture capitalism usually involves only a handful of wealthy investors, an ICO is completely crowdfunded and largely driven by momentum.
Even though there are hundreds upon hundreds of tokens currently on the market, most of the popular ones such as IOTA and Ripple are already well-established in terms of valuation and as a result, also have a significant market cap. That said, almost every single one of them were once part of a company’s initial coin offering and at that time, not publicly traded. The entire point of an ICO, after all, is to offer token buyers an early opportunity with a company that is technically sound and building a promising blockchain technology.
More than 50% of new ICO tokens are built upon the Ethereum Network and it is common for companies to trade their tokens for a specific amount of Ether in return. Not all ICOs are created equally though. Some tokens are drastically more successful than others for reasons that are at times difficult to quantify. In some cases, a token shoots up in value right after opening up to public trading, even if it didn’t originally raise a large amount of capital during its offering period. Other tokens make large raises, but drop in value once they openly trade on a public market.
Take, for instance, the Horizon State token sale that took place a few months ago on the Cryptonomos ICO platform. The company’s slogan revolves around “redesigning democracy for the 21st century”. In short, Horizon State aims to deliver a blockchain-based voting and decision-making platform for public use sometime in the near future. The platform will use the Ethereum blockchain to maintain immutability and protect voter identity. In time, Horizon State will integrate its voting infrastructure within political parties, multinational companies, and even communities in developing nations.
The company held an ICO for its Ethereum-based Decision Token in October 2017. Even though Horizon State and many media commentators believe that such a blockchain-based voting platform can potentially offer a wide range of security and convenience benefits, its ICO did not have a particularly large raise as compared to other tokens during the same time frame.
However in spite of Horizon State raising just US$1 million in its ICO, the price of its token quickly appreciated. In January 2018, Horizon State’s Decision Token (HST) reached an all-time high valuation of around US$5.5 (a 55x return) with a total market cap of over US$170 million. For reference, the market cap of the token started off relatively small at the end of its ICO in November 2017, at just under US$2 million.
It is important to note that Horizon State’s HST was neither the first, nor the last cryptocurrency-based token to see a spike in valuation shortly after the conclusion of its ICO. The truth remains that a lot of tokens that are successful today were simply not as highly valued when they were initially offered to the public.
On the other side of the coin, boxing celebrity, Floyd Mayweather, promoted a token named Stox through an Instagram post in July 2017. The token’s ICO went on to raise over US$30 million a mere day after opening to the general public a few days later. Today, as of the time of writing this article, Stox has a market cap of $36 million, the tokens are worth US$0.83, though during the ICO were 1/200th of an Ether, which by today’s price would be US$5.23. A significant drop.
Snovio, like Horizon State, is another Ethereum-based ICO that saw great success after the end of its token sale in November 2017. Advertised as a decentralized lead-generation platform, the company is hoping to use its SNOV tokens to “incentivize contributors” that provide useful demographic data. Snovio’s ultimate goal, therefore, is to eliminate low quality leads while still promising suppliers a respectable distribution of revenue from data sales.
After selling each SNOV token at roughly US$0.01, Snovio raised just over US$2 million in token sales by the end of November 2017. Only two months later in January 2018 however, SNOV’s valuation reached a peak of US$0.41 and a corresponding market cap of US$170 million.
Even though its price has since dropped to around half of that, the token still offered a significant net gain for all token buyers that participated in the ICO. Admittedly, it is early days for SNOV since at this point in time, it has not even existed for six months. Despite its immaturity and low initial valuation though, it has already more than proven itself to be an exciting token. Similarly WAX saw its market cap quadruple within a month of its ICO ending in November 2017 where it was offered on the Cryptonomos platform.
With the entire world’s attention slowly starting to shift from major cryptocurrencies such as Bitcoin and Ethereum to the underlying ICO ecosystem, the market is experiencing an influx of new token buyers. Only recently, at the end of 2017, it was reported that ICOs received as much as US$5 billion in funding throughout the course of the year. Furthermore, the entire cryptocurrency market cap hovers at around US$600 billion today. If the ecosystem continues to grow as it has in the past year or so, that figure will soon surpass the US$1 trillion milestone.
Going by the history of several past ICOs, a token’s success should not necessarily be measured by the amount of funding it secured during its ICO period. If the token in question offers intrinsic real-world applications and value propositions, it may well gain traction amongst the masses — perhaps just a little later rather than sooner.
Writing and Research by Rahul Nambiampurath
