Crypto-Startups Token models surviving in the space
The future life expectancy of some technology or an idea is proportional to their current age so that every additional period of survival implies a longer remaining life expectancy — Lindy Effect.
According to a recent study carried out by financial research firm Autonomous Research, Crypto-Startups have raised $20billion since the start of 2017 while more than 50 percent of ICOs have failed to raise funds subsequently have closed. 56% of the Crypto funded Startups closed shop within the first four months of their ICO. Most of the dead crypto-projects barely survived a year due to funding-drought because they either failed to STABLE their crypto-fund cause of being accused of closing shop by investors or they went on Lambo-spending spree while some failed to follow some Startup rules; Proof of concept, knowing the market and cash-flow which VCs look out for. Funds that were raised were based on just ideas written on whitepapers with fanciful websites and other eye-popping marketing sensations.
Aside DAO projects like Dash, DigixDAO, MakerDAO, and other dividend-paying tokens that are still growing strong, lots of other crypto projects already closed shop after raising millions of dollars in 2016/17, fueled by FOMOers greed and failure to DYOR which is absent in the VC/PE investment world. Seasoned Investors/VCs do Startup valuation and would choose to have a say in the affairs of the organization especially finance. Crypto-Business tokens were created without sound utility, proper market evaluation, government regulations and sold majorly to speculative traders/Whales rather than users that would drive adoption.
Even security tokens still need a strong business model that relies on active user adoption in order to generate dividend for holders of such token. Crypto-Startups like Exchanges are now capitalizing on their large active users to create Security tokens to raise more capital for growth; SatoWallet Shares, Binance BNB, KuCoin Shares, thereby giving a sense of ownership to the community of users and rewarding them.
Based on my research, some of the surviving crypto projects have these in common;
Security Token: A security token that guarantees dividend at the end is highly valuable to holders especially when it is a Mix of Utility hence the unwillingness to sell such token thereby controlling the market circulating supply which increases the value of the token and gives the team opportunity to raise more funds by liquidating team-held tokens when needed. Take a look at ICONOMI and SingularDTV.
Asset-Backed DAO-like Structure or Community-vested: Projects that are community driven, funded and controlled seems to be waxing stronger. This is because collective intelligence is used in directing the affairs of the project which makes it valuable to the holders of such token especially when it is backed by an asset. MakerDAO and DigixDAO come to mind.
Airdropped-Approach: This approach of token distribution seems to be gathering popularity amongst startups that have valuable and venturable product ideas. Aside from the fact that these projects use it to create free viral marketing for their project, it helps to distribute the token to a wider audience of potential users who would have missed out in having the token if an ICO approach was used. For a valuable project, holders of such token are not in a hurry to trade their tokens when it is listed on an exchange because they didn’t pay for it and this helps against dumping of the token. Since the market determines the value of the token, teams can easily raise their required operational cost from the market by liquidating their team-held tokens.
There is still no stone-crafted hard rule to follow for businesses to survive but one that has remained constant is being able to flow with the dynamics of the ecosystem especially when it comes to management. Prudence in the management of funds is important alongside a system that should be able to stand censorship from the government as some of these projects died a natural death due to government legislation, Corporations litigation and the dearth of fund caused by the high volatility in the crypto-market.
Charles is coFounder of VesselTrust, a blockchain solution architect, full-stack and mobile developer with over a decade experience in the IT world creating applications and running several startups. Passionate about great ideas that have “Proof of concept” and scalability. #Fitfam gym dude and enjoys swimming when he is not in front of his laptop, bar, cooking, playing ping-pong or snooker.