Why Do So Many ICO Fail? Experts’ View
“90 percent of ICOs will fail”
That is true. After all, if it was easy to find a viable idea, get financing, attract customers and set this idea working everyone would do so.
As long as we speak on the matter of cryptocurrencies and this way of fund raising is open to public, let us consider the primary reasons for the most of ICOs did not get off the ground (in case they raised necessary amount at all).
Lack of market study and client collaboration
Richard Nehrboss, CEO at decentralized database Shardix believes, most of ICO teams are focused on the technology itself rather than the benefits it may bring to the world.
“Over the last year, we have seen numerous ICOs introduce promising new technologies. However, many of these companies have lacked a coherent community interface. This stems from a pervasive mindset in the blockchain community which has been primarily focused on the technology side of development – “build it and they will come”.
Lack of experience
A slight glance at many ICO teams may easily make you feel older. Of course, all of them are undoubtedly brainy guys. You can hardly find anyone better to take the lead of that technological revolution than those who grew up with technologies woven into daily life. The only thing they are short of is experience.
Ian Kane, co-founder to Ternio:
“In my opinion, there are a few reasons ICOs fail, but it all boils down to lack of experience. These companies lack experience in a few categories:
1) The industry they are targeting – banking, shipping, real estate, etc.
2) Why blockchain is even needed for their use case.
3) How to effectively manage a business – hiring, finances, PR.
4) Post ICO communication – updates to their core community are critical.
When building any business, it’s important to have an unfair advantage. You must communicate why your solution is better than everything else already out there and why no one else has a more appealing offer. Making something that is just incrementally better will not help your business succeed.”
Joe DiPasquale, CEO and co-founder of BitBull Capital has got a standing in the issues of investing into ICO. As he put it, along with lack of experience and long-term perspectives the financing mechanism itself peels apart many ICO from the very beginning.
Too many ICO get started without any viable product or, as it often turns out, without any clear concept. Easily created websites and simply launched ERC20 tokens gave birth to many ICOs while many just had no idea what their product must finally look like.
Pavel Bains, CEO and co-founder of Bluzelle:
“One of the most important [reasons ICOs fail] is that there’s a lower barrier to entry for raising money through an ICO than other funding options, such as venture capital. As a result, more untested ideas that haven’t gone through the rigorous process of assessment by experienced investment professionals get through to [the] ICO stage than with other avenues. Therefore, projects that would have been rejected by VC or Angels are still able to start the ICO process, even if they then flounder as ICO investors scrutinize the detail”.
ICO fall victims of their own success
CEO of 360 Blockchain USA Jeff Koyen notes that ICO teams just fall for hype and this just doesn’t do any good for them.
Although the majority of traditional startups fail, this is specifically characteristic of ICO as they are just not ready to bring their products to the market. So Koyen continues:
“It’s wonderful to raise money without sacrificing equity. Most ICO-funded founders still control their companies. They have advisors, not directors; they have token-holders, not cap tables. But without traditional accountability, founders and team members can lack discipline. In short, the money was too easy.”