I’m talking about token sale size, of course. What did you think I meant?
No, don’t answer that. I am thinking about that, too. Yumm!
But on the less culinarily inclined topic, we are fundraising. Given I’ve been talking to everybody and their crypto-educated grandmother, it’s a secret about as open as our kitchen door after the kids are done feeding the raccoon (don’t ask).
It’s going much better than I expected, considering we’re coming into the blockchain game as crypto-outsiders. But a few related issues do consistently pop up, so I figured I’d just talk them out here, as much for my own benefit as for those that might end up following us down the same path.
Issue #1. Why a token sale rather than the standard venture route for raising funds?
Issue #2. Cap or no cap? Hard or soft? How high? And if “yes” to a soft cap, how far to potentially extend the sale once that cap is met?
Issue #3. To burn or not burn the remaining tokens once the token sale completes?
We are fielding conflicting suggestions, thoughts, anecdotal evidence on all three, not to mention pre-sale buyers’ specifically stated conditions — all of the above weighed against our own understanding of our ecosystem and of the ultimate purpose of our token sale.
Which is to say, all of this neatly ties into issue #1. So, here goes.
1. Why a token sale?
There are many different ways to get a project financed, and whether or not one or the other temporarily gains prominence in public perception / word of mouth over the others, they’re all valid — if picked for best fit after a specific business need. Kickstarter-style crowdfunding, equity crowdfunding, angel capital, venture funding, ICO, bootstrapping (until you end up raising $60 million as your series A because technically, you don’t really need it so much as could use it if it’s practically being catapulted your way). It’s all good!
For us… the token sale is the answer because along with initial monetization, it gives us that ever-important user base with a vested interest in the success and growth of our platform. After all, WishKnish was built to capitalize on the incentivization of users to bring in their social circles for a shared benefit, joining a growing audience with currency to spend at hosted storefronts rather than on any other e-commerce marketplace.
TL:DR: Yes, there is a method to our madness. We need more than a development or marketing budget. We need actual bodies out there, participating in the economy and joining us in making this beastie thrive.
2. Token sale parameters
Considering we need tokens in folks’ hands to make WishKnish a viable alternative to more established shopping venues, how low or high can we set the soft cap before it scares away either the retail buyers or the aggressive speculators looking to quickly cash out in secondary trading? (A soft cap signals how many tokens need to be sold before the sale can be largely considered a success, while continuing to collect funds until a specific time or higher sales target).
Of course, if you can convince larger token buyers that you’re the sort of token to go long on, then the cap wouldn’t matter — HODL will be the name of the game, as its value can only rise together with its usefulness within the ecosystem. AKA “having your cake and eating it, too.” Of course, the need for monetization received via high-discount big-value buyers needs to be weighed against the overall number of users coming into an ecosystem, and the cap needs to reflect this — enough tokens should still remain after the “whales” are done feeding, to lure in the retail clientele.
Not to mention, even if the consensus is reached on the size of the cap, the question remains on whether a hard cap should be put into the sale conditions that gets activated once the soft cap is reached — and how long is the time given to achieve that, in keeping with the caveats already applicable as discussed above?
The rule of thumb here seems to be: it depends on what you and your advisors feel the market can stand without inducing glut. And then, even if you have miscalculated and the market is eating it up… do not suddenly raise the cap midstream. It’s just not fair, kind of like it’s not fair to raise the price of a restaurant meal after it’s been ordered, just because the management notices you really, really like the dishes.
TL:DR: Be mindful of the institutional investors willing to back your project and individual customers trusting that you deliver, but don’t shortchange it either if you have valid reasons for extending the sale / cap for the overall health of your world-changing experiment.
3. Post-ICO Burnout
Let’s say the sale is done. You are very nearly / almost / somewhat / hardly at all sold out. What do you do then with the remaining tokens? The caveats of #2 and the reasons that got you into this in the first place as per #1 still apply.
Why would you burn the leftover tokens immediately? For one, to make sure that if you promised that you are offering 50% of the existent overall supply, exactly that percentage ends up in the users’ hands when the dust settles, regardless of how much got sold. The cost for this is (temporarily) shrinking the potential size of the ecosystem — at least, until you deliver on your promises, the value of your token rises, and users start subdividing your token into smaller, and smaller bits — but on the plus side, it’s a proven way to make sure that the supply doesn’t keep overwhelming the demand.
Another way to maintain a healthy supply vs. demand during and after the sale is to enforce vesting (gradual release of tokens) and/or a lockup on selling your tokens for the big pre-sale buyers, and especially the advisors and team, so that a sudden secondary exchange selloff doesn’t foul up the ecosystem for everyone in the middle of a crowdsale.
TL:DR: Don’t be greedy, and for heaven’s sake, don’t sh*t where you eat.
Which… kinda helps keep everything in perspective as we finalize the parameters of the WishKnish crowdsale. At least, it does for me. Would love to know what you think.
