Sunday, February 5, 2023

Looking Past the Hype: How Can the ICO Truly Succeed?

Looking Past the Hype: How Can the ICO Truly Succeed?

Almost every cryptocurrency investor gets excited about an ICO. How could they not, given the billions of dollars ICOs have raised over the last two years? But after the hype dissipates, one question remains: how can a company keep their ICO legal and increase their chances of success?

Also read: Adam, Tim Draper Share Their Investment Secrets at Crypto Invest 2018

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That very question was at the center of a talk between Satis Group co-founder Emma Channing and Park Capital managing partner Alexander Lopatine at the 2018 Crypto Invest Summit in Los Angeles.

Why ICOs, and Why You Need Advisors

During the talk, Channing and Lopatine discussed the kinds of advisor services ICOs need to stay compliant with the SEC and ensure success in raising capital.

Lopatine stated that ICOs are attractive fundraising methods for startups due to the perceived savings on legal costs compared with traditional fundraising, as well as the opportunity to provide liquidity to investors – giving them a higher incentive to provide funding.

However, as the SEC cracks down on ICOs, there is a lot for a blockchain startup to consider when organizing one. That’s where advisors come in.

Lopatine, there to promote Park Capital’s new WYSH application, said the app acts as a concierge service for ICO organizers, connecting them with advisors and resources to help them organize their token sales.

Adam Lopatine ICO
Adam Lopatine

“You have to do your own research,” Lopatine told the crowd, advising ICO organizers to only deal with reputable advisors and service providers.

According to Lopatine, the WYSH app helps with that research.

Channing said good advisors have a comprehensive list of available services on their websites. Also, she continued, a good advisor should connect you with other top advisors. One person can’t do it all, she explained, and token sale organizers should consult multiple advisors with varying specialties.

The Biggest Challenges Ahead for ICOs

Advisors aside, the ICO space still faces challenges as regulations get tighter and potential investors have higher expectations for projects.

In general, Lopatine said a very important aspect of having a successful token sale involves providing network effects that give your token value right of the bat.

“You need utility from day 1,” Lopatine told the crowd.

Adding to that, Channing commented on the now-infamous utility vs security token dichotomy the SEC established, saying that it will be hard for companies to build an actual utility token and remain compliant.

Emma Channing ICO
Emma Channing

To that end, Channing speculated that, in the near future, startups will turn to smart contracts to provide the platforms’ utilities in place of tokens. Then, companies will issue security tokens for trading on top of the smart contracts.

Thus, ICOs have a long way to go before becoming fully compliant and legitimate in the eyes of governments and the public. Channing and Lopatine remain optimistic though, believing that companies can succeed in their token sales with the right advisors.

Have your say. What is the best way forward for startups thinking of having an ICO?

Images via Satis Group, Park Capital

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