Do projects raising capital through launchpads still need seed and private investors?

GPool Launchpad has strong opinions on this, but it never does any harm to review the situation.

When Polkastarter ($POLS) launched in 2020, the world of raising finance for crypto companies was perhaps a little more opaque than it is today. Prior to POLS and the launchpad movement, new projects needing early finance, would sell their tokens prior to launch to interested investors prepared to take on the risk.

These venture capitalists, seed investors and private individuals (VCSPs) would demanded large allocations of tokens at knock down prices, often with poor vesting periods, to offset the perceived risk of backing a project at such an early stage. Thus creating the mythical whale wallets that still hold sway over so many companies today.

POLS in 2020 sold 42.5% of its entire tokens minted to seed and private investors.

POLS Whitepaper

CoinGecko

This huge allocation of tokens was sold at $0.0125 (seed) and $0.025 (private), with the public listing price set at $0.05. There was a vesting period, but 20% of the seed tokens and 25% of the private tokens were unlocked immediately and within 3 months of launch over 50% of all the tokens minted were available to trade.

With a weak vesting period and so many tokens sold privately, it was no surprise that the POLS token launch was a classic pump and dump. Seed investors selling at around $0.6 made a huge 48x and private investors 24x. Retail investors caught in the launch hype, buying at $0.6 saw nearly a 6x fall over the next few weeks.

The questions to ask today are:

Do projects with access to launchpads still need VCSP investors?

VCSP investors can add a great deal of experience, connections and expertise to a new project and can provide financial help at a very early stage. These type of investors are invaluable and should always agree to strong vesting periods as they are investing in the long-term success of the projects. Some will have no other interest than to make a quick profit, causing the pump and dump so often seen.

GPool launchpad, who joins projects at a very early stage, can help weed out bad VCSP investors and work with those that only have the long-term interest of the project at heart.

Could a launchpad’s community of investors replace VCSP investors?

So many launchpads like POLS join projects at the last minute and accept just 1% of the tokens minted for their investors. GPool feels this is totally wrong and by working with projects at the earliest stage possible, will convince them to give real allocations of tokens to their community.

What would be the benefits if they did?

It’s so simple, projects launching their IDOs through GPool will replace bad VCSP investors with the launchpad’s community of retail investors. This will result in:

1. No poorly vested whale wallets causing pump and dump
2. Much larger allocation of tokens for the GPool’s community
3. More whitelistings and much higher allocations per investor
4. Projects will inherit a large community on launch
5. This community will be their media shillers and promotors
6. Retail projects will have an instant customer base
7. GPool’s loyalty scheme will encourage long-term holders