You might not realize, but there is an information asymmetry in the world of start-ups and ICOs that means your view of success might be skewed.
We take note of the ICOs that succeed, just like we take note of the start-ups that succeed, and mostly forget the others — but the fact of the matter is that a majority of companies that launch an ICO will fail, just like a majority of all businesses fail.
In fact, according to the U.S. Small Business Administration, more than half of small businesses of any kind fail in the first year, and 95% fail in the first five years. There is nothing wrong with this: It’s a fundamental part of the creative churn of experimentation, failure, and reinvention that keeps innovation moving. But it’s important to recognise that, while we always want to plan for success, a token launch is not a one-way ticket to a profitable, sustainable company.
Looking to the cryptocurrency field specifically, analysis conducted by Architect Partners LLC estimated that 59% of ICOs conducted since June 2017 did not achieve their intended token distribution. That’s not the same thing as saying they failed — most ICOs set a target funding amount higher than their minimum operational needs — but it’s sobering news among all of the breathless coverage of the current ICO craze.
It’s also an indication of the fact that investors are becoming more cautious about which projects they back, and a higher level of quality is necessary in order to secure funding. Both of these are signs of rising standards in the industry, and rather than being a negative trend, represent better prospects for long-term success beyond the hype cycle.
Lessons to learn
As the bar for ICOs is steadily raised, there are a few things that founders should take into account when creating a business plan for a new start-up.
Do you have a plan for the long term?
Coming up with a great idea is fun. Raising the money to make it a reality is even better. But succesful businesses need a clear plan for what to do once the hype has died down, and how to keep momentum in the medium and long term.
Have you analyzed consumer need?
A lot of ideas that seem great on paper, and are technically innovative, still don’t correspond to the real-life needs of the people they are meant to target. One way to make sure your product or service doesn’t fall into this category is by conducting market research ahead of time, and letting members of your target audience test prototype versions and give feedback.
Do you know your competition?
If other companies have marketed a similar product, you’ll need to know exactly how yours compares, and which areas you improve on. If your product is new to market, you can count on someone else creating a similar version if you’re successful — so you need to think ahead of time about how you’ll deal with competition.
Are you prepared for setbacks?
When launching a product, it’s important is to realize that some setbacks will be inevitable, and to think in advance about how you intend to deal with them. It won’t all be smooth sailing: You might sink money into a project that doesn’t work out, find that you’ve miscalculated your audience size, or even lose a member of your team. Having a successful mindset means being able to roll with the punches and adapt to these kind of surprises. There’s a way around almost every obstacle, as long as you can keep your head clear and think creatively about solutions.
Overall, starting a business of any kind can be nerve-wracking. But with a good team and a good product, there’s no reason not to succeed. It’s just a matter of quick thinking, careful planning, and clear advice.
