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What’s Wrong with Most ICOs and What You Can Do About it

By April 25, 2018 No Comments

If you’re like me and into cryptocurrencies for a while, ICOs probably make you “moan” as much as me. I mean (most of them) just don’t make any sense at all from an investment point of view.

Anyhow, I find myself visiting ICO sites and this is what usually happens.

What do we have here? Ohh what is this?

Another ICO that presents: “Just an idea”, “Just a concept with potentially some potential”.

Or even worse, It’s a: “there’s no purpose at all to the actual ICO or Token but our soon to be released, or maybe one day to be released amazing product, will make the price of this token go skyrocket deluxe 10.000 times so you should just buy it!”.

Pffffff. just wasted another 10 mins of my time! Who is gonna invest in this?

14 days later.

Let me check this site again, ohh wait they got 20+ million in funding based on “Just a concept with potentially some potential”.

Still, ICOs or actually tokens are potentially the best thing that happened to mankind.

So what’s wrong with it from an investment point of view?

You see, in my previous article, I wrote that for example, startups, are usually funded by Angel Investors and Venture Capitalist firms. If there’s one thing these guys (and especially VCs) do, is their due diligence.

They ask fairly basic questions like:

  1. Is this Company previously backed by (another) Venture capital fund (VC firm) and/or Angel investors with a big name?
  2. Does the company present its complete financial statements?
  3. Does the company give insights in its costs?
  4. How much will it spend a month (what’s their burn rate)?
  5. Does the company give its financial/growth predictions and/or predictions for profit and growth?
  6. Does the company explain its benefits opposed to their competitors (if any)?
  7. Does the company have solid strategic partnerships?
  8. Does the company have patents?
  9. Did the company previously give out any real equity (not tokens or coins) but real shares?
  10. Does the company have trademarks?
  11. Does the company present its sales plan / marketing plan / go to market strategy in any way?

So while researching over 1,500 coins on CoinCheckup we found that the answer to most of these questions is flat out no or not traceable/not public / or perhaps, just: Why would we?

In other words, you can’t do any basic due diligence on tokens, you can’t see their potential, because information is just not publicly available and/or not there at all so why would we?

This is what’s wrong with ICOs and tokens.


image source: Cryptocoin Mastery

Are you telling me I’m investing in “ just an idea” !?

Nowadays most ICOs present “Just a concept with potentially some potential”.  What I mean by this is that they “just present an idea”.

[bctt tweet=”Nowadays most ICOs present “Just a concept with potentially some potential”.  What I mean by this is that they “just present an idea”.  Let me give you a hint: IDEAS ARE FOR FREE!” username=”coincheckup”]

This is just ridiculous, I invest my money in an idea and I just hope they actually deliver. Let’s give this company $20million+ US dollars to see if they might deliver.

I’m curious if most ICO investors are actually aware of this.

Dear everyone who reads this! In case you didn’t know. Ideas are for FREE!

Guess what:

  • Ideas are free;
  • Ideas are easy;
  • Ideas are just being somewhere at the right time at the right moment with the right annoyance about the right thing;
  • Ideas are worth “0” as in ZERO, nothing!
  • Your mind gives you ideas for free!

But I hear you thinking, I have great ideas, I can build a multi-million dollar company out of it, right? Facebook, Twitter & Google were great ideas right?

Yes, you’re very right. The founders of (for example) Twitter and Google had a great idea, but after that they were not romantic about it. They just started executing.

They iterated and iterated and iterated and failed and failed and failed and came to a great product while working their asses of, in 80+ hour work weeks.

Or maybe they didn’t work so hard but what’s sure is that they did find a business sweet spot in simply excelling in execution!

If we can believe the Facebook story, Mark didn’t even come up with the “Facebook idea” himself, yet we know there wouldn’t be a Facebook like Facebook is today, otherwise, it would have called WinkleVossBook (or likely a different name 😛 but owned by the Winklevoss twins).

They seemed to have gotten some nice money out of Facebook anyway but let’s be honest, that’s because they just lawyered up properly :-).

Still don’t believe me? Let me give you 50+ business ideas for free!

At one of my startups Nexibeo, we give 50+ startup ideas away for free.

Yeah right, must be crappy ideas then?

I don’t think so, they range from lifestyle business concepts (make $100k+ and travel the world or do whatever makes you happy) to potentially multiple million dollar business ideas. We even sorted them for you. How easy is that?

Why we give these ideas away for free?

Because we know we can’t execute on all of them;

Because every good idea needs a leader (or leaders) who live and breath by that idea 24/7!

Because we know we’re good at building teams around startups once there’s a good leader;

And currently, because we are very busy already helping the crypto community rating with developing CoinCheckup further.

Feel free to check Nexibeo and let us know if you think you’re the founder to launch any of our ideas. We will happily help you set up a team for your startup.

If you want to take one of the ideas and set up your own team around it and build a successful business out of it in the upcoming 2–5 years then we’ll be the first one to congratulate you with it :-).

Enough with the complaining, solutions please!

I’m ranting deluxe in this post. Honestly, that’s not really me. One of the things I believe is that: Complaining is for people who are not looking for the solution.

Anyhow, no solutions without complaints, so I guess complaining gives birth to the solution.

One possible solution could be the IPCO model.

Screw ICOs, Let’s try IPCOs

Possible new model: ICOs that make more sense… Why don’t we try the IPCO?

We basically need to set up frameworks/standards as a crypto community on how the ideal ICO should look.

My main annoyance about ICOs is the fact that the most ICOs present “Just an idea” or worse: “Just a concept with potentially some potential”.

In my opinion: If you ask people to invest their money, you better show them you can actually develop something of quality before they invest in your business.

I like to propose a model where we actually buy into a service/product. Something that’s already working and not a 1-week-developed demo, alpha or worse than this.

You say IPCO?

IPCO stands for: Initial Public Coin Offering.
During the IPCO a company makes its product/service or a premium product/service available to the public at a discounted rate while giving tokens that offer future benefits in or around the product/service.

How would this IPCO model work?

You buy a subscription for ServiceX and you get “free tokens”, these tokens can later be used to:

  • extend your subscription;
  • hold in your portfolio and share for example in the profits of ServiceX;
  • trade on the open market to people who want to buy a subscription to the service at discounted rate;
  • trade on the open market, just to speculate and gain a profit;

Anything else? I need your feedback here dear reader. Many thanks 😉

I used the Software as a Service example above, but this might as well be a product or anything else that actually adds value to people’s lives, before they have to buy the Token.

How is the IPCO any different from an ICO?

Unlike the ICO, you buy a product/service, not “Just an idea” or “Just a concept with potential” or “a token/coin that might grow in the future”.

Unlike the ICO, the tokens are an addition to the subscription, instead of the other way around.

Therefore the product needs to serve value to its users/subscribers from its IPCO launch date and improve after the IPCO launch date.

Unlike a lot of ICOs, the tokens should be used in/for the product. Personally, I’m a bit tired of a coin that, doesn’t have any relation to the product/service itself.

Bitcoin and Litecoin and many others create value by being a digital currency themselves. If there’s an amazing new technology that is better than these coins they might have the right to have the same value proposition, but personally I believe we have enough of the same at the moment and we need Blockchain related products to make Blockchain go mainstream.

Unlike the ICO, the purpose and value proposition of the token has to be clear directly. This is one issue with the current ICOs.

You have to investigate a whole whitepaper before the purpose and the value proposition of a token becomes clear.

Ideally I would like to see ICOs come up with creative models to create value for their token holders.

Now I hear you thinking “there’s other ICOs that have a working product”, or say they will release a working product. Some of them might actually already fall in the IPCO basket.

I’m personally very happy to learn about these ICOs but I would like to see more of them. That’s why I propose an IPCO model.

The purpose of defining a model is because I’m tired of finding those unique cases where an ICO already has a “Real working product” and maybe even better: “a product that adds real world value”.

How is the IPCO any different from Crowdfunding your product/service?

Unlike a product you would buy on Crowdfunding sites (like for example for IPCOs you should:

  • Get ((early) access to) the product directly. Most of the time this is not the case with products you buy on crowdfunding sites. I’m still waiting for my pair of fancy headphones that I ordered last year and should have been delivered last April.
  • Get tokens that will give you future benefits for the product itself.

The product itself is not good enough if you ask my personal opinion.

CompanyX asks people to invest in the first version of their product/service itself and CompanyX doesn’t give them anything else in return.

CompanyX asks you for your trust and the only thing they give you is a first version of the product or service. Why not give more rewards to the people who give their trust in your business?

A potential gain and ability to publicly trade in your company’s tokens.

Before the invention of the token, this was never possible. As I described in a previous article, tokens make it possible to trade anything.

Tokens make it possible to let the market decide the value of your token, the market is always right so this is a great thing, in my opinion.

More (IPCO) standards that would make me happy

So while brainstorming I came up with some more standards that I would personally like to see improved in the current ICOs.

The current IPCO product you buy is subject to grow from its current version. Since it’s an “Initial product offering” the focus should still be on “Initial”, therefore a Roadmap should always be available for IPCO offerings and companies should commit to grow their product based on this roadmap for a set period of time unless “acts of god” prevent the company from being possible or unless “better opportunities arise for the company and its token holders.

The initiator of the IPCO has to offer a trial version of the product so potential buyers during the IPCO phase can make a fact-based decision on whether they want to buy into the product or not.

This makes sense according to me. Why would you force someone into a product if they’re not even able to use a trial version of the product?

Tokens given in the IPCO should give future benefits to the product itself.

Besides the ideas I presented in this article an IPCO should offer more for it’s subscribers/token holders. Some possible ideas:

  • Access to special features of the product;
  • Discounts to additional services
  • Voting rights related to product development (items on the roadmap)
    Anything else? I need your Feedback here dear reader. Many thanks 😉

How to move on from here?

I honestly hope this article gains some traction. Not for personal reasons but because I hope that more people are willing to share their vision on a “Better ICO model”

In my next article I’ll likely write about the transparency I would like to see in ICOs or IPCOs if you will.

If you give a company your money you should be able to expect what they are going do with your money.

[bctt tweet=”If you give a company your money you should be able to expect what they are going do with your money. ” username=”coincheckup”]

I don’t think you need to know all the details but I have seen ICOs that mentioned: 10% — Marketing Plan

This is a joke to me. If CompanyX’s ICO generates $8 million USD are they really gonna invest 800.000USD for a marketing plan??? Even if they hire Ogilvy for your marketing plan you would be spending less.

We simply need more transparency, anyhow more on that later 😉

Please share your vision on the ideal ICO. Please share your thoughts with me on what you expect from ICOs that you invest in. Reply in the comments please! 🙂
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