I have been interested for a long time, even worried, and very worried the following question:
Why the ICO projects are collected for $20-30-50 million, but most important, why are these projects believed?!
My occupation is closely related to the world of investment, venture capital.
Venture funds are covered with “gray hair” when they hear that a project that does not even have a hint of mwp (minimal work product), but only a clumsy presentation (White Paper)and after which appearing even more questions than answers, and sometimes you just want to "blow it up", requests $10 million.
Have you ever thought what $10 million is?
With such a budget, with a proper use in the CIS market, it is real to grow as soon as possible a "unicorn", at the same time attracting a couple of competitors.
For example, who may not know, in traditional, venture capital investments there are life cycles of projects and stages of their financing:
The pre-seed stage is an investment in the idea, when there is nothing, except the description of the idea, as a rule, they are invested by the business owners, friends, relatives or especially fans of extreme and films about "Facebook" and Steve Jobs. The average amount of investment on the pre-seed stage is up to $50,000.
90% of ICO projects are pre-seed stage, they can be given not more than $50,000. For creating MVP and testing it is more than enough. If they successfully "lose all this money" then give more is not worth.
The seed stage is an investment from $100,000 to $500,000, when there is already a small team, mwp and at least some cash flow, sales. The IIDF at this stage throws in projects up to 25 million rubles, that is, about $400 thousand. At this stage, they expect from the project of explosive growth. Money is actively pumped into marketing. Foreign funds can be more generous and throw in up to $1 million, but at the same time, you must be really cool and promising guys.
About 10% of ICO projects with MVP belong to the sowing stage. That means, the "red price" of $500 000, or at the very least $1 000 000. Believe me it is a good amount of money to understand - there will be a project stand for something in the future or not.
Further, Stage A - here, the same IIDF, is ready to cough up the cash for $5 000 000, it's about $5 million, BUT, by this time, the project itself is something that does not represent 9 out of 10 projects with MVP here in the ICO market. It is already strong, experienced, close-knit and ready to break through the walls of the team, behind them are business angels, funds are being built in the line, the product loudly thunderes at least on the local market (CIS,Europe or the USA). That is, at this stage, as a rule, the project receives money for scaling and entering the international market, $5-10 million. If the project is fantastically promising, the amounts can be $20 and $50 million. At that moment, the most "meat-racking" begins, projects fly in different directions like splinters, some collapse, others stagnate, others, some, grow further. Why? Because the international market is a vigorous mixture of the political and mental characteristics of each individual region, each of which can be crucial for the project.
It means, the exit from scratch, immediately to the US, Europe, Asia is impossible in principle. Even gigants are difficult. There is no need to walk far behind the examples, Apple and Google decently tense in order to maintain not the largest market share in Asia. Even in Russia, Google, with a capitalization of $800 billion, divides the market 50/50 with Yandex, whose capitalization is 80 times less. Actually, it is for this reason that international expansion always lasts for years, takes place in stages, demanding huge financial, human and temporary resources. It's not a full-service agency to contact, you know. Sometimes the ministers and presidents of the countries meet.
Stage B is often invested in "unicorns". This is not even an investment, but a purchase of a stake in the project, which will be released in the next 1.5-2 years for the IPO. There, the amounts reach $100- $200 million.
And now, try to correlate this with the ICO market. I took for free 3 projects on ICOBench with a rating of 4.5 and higher, that is, top projects:
Where is the Elysian project $ 19 million (soft cap $ 3 million)? The guys pushed into the project all the most bizarre technologies, AI, VR, blockchain, to create a platform for websites, through which data users will be more protected. In this case, AI and VR are needed in order to make the navigation on the site more aesthetically attractive.And all this is decentralized. Although, if their service is "pulled out of the outlet," for example, to sip tea into the server or simply not to pay the domain, then most likely, all of the decentralization will disappear along with the project. Again, the amount of the fee – we have enough for all-about-all $ 3 million, but let's get better $ 19, you never know.
Where is EtherInc $22 million (soft cap $ 1 million)? Some ridiculous fork of Ether, the purpose of which is to create an alternative protocol for launching decentralized organizations and creating decentralized applications. Well, how about, create, all the necessary tools are there, Ethereum is available for any perverted forms of picking with a "fork", $22 million for you? Buy a plant to produce smoothies? What is the gap between softcap and hard cap? Let's say the annual budget of the company is $1 million. If we attract a soft cap, we will live a year, if the hard cap, then 22 years. How do they plan the amount? What logic? It is wildly interesting for me.
Where to Iagon $50 million (soft cap $5 million)? Here you have a blockchain and AI and Machine Learning and Big Data and cryptography and all this again decentralized. I did not even read what they do and why. The difference between Soft Cap and Hard Cap is the difference between the 2 stages of the project life cycle. Between the local boom and international expansion. At the same time, no one indicates what will happen if Iagon collect $5 million, what then? And if $ 10 million, then what? Will I let 2 Iagon'a? And if $10-15-20-25 or 30-40 million, what will happen in this case? Every "piece" of investment, something has to do. If we attracted $5 million, we do MVP testing for the local market, if $10 million, create additional functional, we pump into marketing, we seize the local market. If $50 million, we cover the US, Europe, Asia.
And if the local market failure? If you have enough $5 million or, to hell with it, $10-15 million, to understand that "everything" is time to go home. Where to put the rest 35-45 million of green money? Put in the pockets obviously.
I chose projects randomly from the TOP ICObench, not for anti-advertising purposes or vice versa. Maybe they will create what they say, maybe not. They just do not need $19-22-50 million for this. First, $1 million will suffice. This money is enough to test what will be created at the initial stage. For those who believe that I'm wrong -> Ethereum and Bitcoin were created on enthusiasm, without tens of millions of dollars of investment.
I'm told that the more the project says Hard Cap, the more interesting it is for investors. I will upset you, but no. This is full nonsense and delusion. Investors do not go into projects with a big hard, they loudly laugh at those who invest there. They are going into promising projects. Simple, understandable and promising, proven their potential. Such projects are found on the ICO market, but they can be counted on the fingers.
The cheese factory on the block, AI and alien technologies discourage investors, because this is several years of development, which most likely will not be brought to an end. In addition, apart from the fact that all this must be sold to the end user and earn at least x2.
No MVP = scam ICO. If a team of the coolest experts from Google, Amazon, Microsoft and IBM could not develop at least a leaky version of what they say in White Paper, then the money will not help them, and in general they are hardly good specialists. In general, it's fun to study projects, there every member of the team is almost Zuckerberg or Durov. Blockchain and decentralization are not the same. Far from the same thing. If the project is disconnected, shut down or put a curse on it, as a consequence, the entire constructed system around the project will be covered with a copper basin, even if they were directly used by the real blockchain rather than "QuickBooks", this is not decentralization.
Artificial intelligence and machine learning, not only require serious theoretical and practical knowledge in connectemics, programming and mathematics, so also the computing power is consumed so much that even your own data center is open, especially on the scale that the ICO projects are drawing. That is, it's not just an if-then-else algorithm you know.
Virtual or additional reality, well, they are clearly not to be aesthetically convenient to use the site. To do this, there is UX/UI probably too big to use for this VR and AR.
Summarizing up all the above, I continue to ask myself:
- Why do ICO projects need so much money?
Actually even like this:
- Why do you continue to throw money into such projects?
