Hard cap & project success
Our project has very small hard cap (2.5 mln USD) that’s why we decide to write the article.
Nowadays ICO is experiencing a real boom, which is often compared to dotcoms. Already in July 2017 the ICO market volume exceeded $1 billion, which is ten times more than for the entire 2016. And according to data for October 2017 ICO startups collected more than $ 3 billion. ICO-wave is still not over, for today there are more than 200 startups which are in the process of raising funds, including our project MyWish intended to create smart-contracts. The hard caps of different projects can be very different from each other. Some of them try to raise $25 million, others $3 million. It is interesting, that many investors do not invest their money in projects with low hard cap, considering such investments unprofitable or assuming that later spent efforts will not be repaid completely. However, the experience of other projects suggests that a high hard cap does not guarantee the success of a startup, just as low hard cap does not mean a failure.
Let’s take as an example the company Spectrecoin, which worked out a confidential payment system. ICO of this company finished in January 2017. As a result they managed to collect 15.427$ — not much, comparing with other startups, however, it is not the thing that impress. During the token sale one digital coin of Spectrecoin costed only 0.001$, nowadays the price of Sprctrecoin’s token is 0,459$. In this way, one token increased 459 times. What exactly affected the huge growth of this token? We must notice such factor as the quality of the product — Spectrecoin considered as a competitor to Dash, ZCash, ShadowCash and Monero. Moreover, relatively small quantity of tokens in circulation and increasing of the project’s popularity raise a demand for digital currency of this company. Today Spectrecoin is one of the record-holders in increasing the price of tokens.
There can be another situation in the world of ICO. Let’s take as an example the company Matchpool, which launched ICO in April 2017. Matchpool is a decentralized protocol for acquaintance, which can be used creating communities with paid subscription and also for recruitment. ICO collected 5 700 000$ — it is not the record among startups, but it is 1000 times more than Spectrcoin’s ICO. During the token sale the token of Matchpool, called Guppie, have been sold for 0,095$. During the whole time it raised 1,66 times and its current price is 0,158$. Without doubts this project became rentable but the tokens’ price didn’t increase even two times. Different circumstances could affect this situation. For example, it could be the fact that after ICO a technical director leaved this position, because he was suspected in fraud. Such negative news obviously affected the image of the project.
If to compare both projects, we can notice that the investor, which bought 1000 Spectrecoin’s tokens, spent 1$ and today his income is 458$. The investor, which bought 1000 Matchpool’s tokens, spent 95$ and today his income is 63$. As a percentage the first project appeared to be more profitable for investor despite the fact that Spectrecoin collected less than Matchpool during the ICO. The quantity of collected investments do not guarantee the success of the project and the increasing of tokens’ price.
More colourful example is the project Polybius. Its main idea is the creation of the decentralized banking system. As a result, ICO collected 31 645 088$ — it is big enough for startups. The price of one token during the token sale was 8,6$ and today its price dropped to 2,9$. Thereby, investors, who sold these tokens during the period of growth, were wise. Polybius produced 20 millions tokens and collected a huge number of investments, but in long-term perspective appeared to be non-profitable.
We can see from these examples that the percentage increase of tokens is not guaranteed by established hard cup and collected investments, that’s why this factor do not have to determine the investor’s choice. Of course, ICO is a risk and you never know will the project successful or not. However, it is very important to pay attention to such factors as a functioning project, the detailed roadmap and white paper, originality and uniqueness of the project. Even small startups could be good long-term investments, so, is it worth to set frameworks for this issue?